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What is Productivity: Capacity or Welfare Management?

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  • Charles R. Hulten

Abstract

A number of recent papers have examined the role of environmental variables in accounting for economic growth, and have concluded that net measures of national product are superior to gross measures in portraying the outcome of the growth process. This paper argues that the two measures are not substitutes, but complements which reveal different aspects of economic growth: gross product is the output concept for estimating the structure of production. while net product is the correct concept for getting at the welfare consequences of economic growth. It is then shown that this capacity-welfare nexus is mirrored in the Hicksian and Harrodian definitions of technical change. An alternative to the conventional Solow growth accounting framework is presented in which the change in national wealth is decomposed into components corresponding to labor input and the Harrodian rate of technical change.

Suggested Citation

  • Charles R. Hulten, 1992. "What is Productivity: Capacity or Welfare Management?," NBER Working Papers 3970, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:3970
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    References listed on IDEAS

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    1. D. W. Jorgenson & Z. Griliches, 1967. "The Explanation of Productivity Change," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 34(3), pages 249-283.
    2. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1973. "Transcendental Logarithmic Production Frontiers," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 28-45, February.
    3. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    4. Martin L. Weitzman, 1976. "On the Welfare Significance of National Product in a Dynamic Economy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(1), pages 156-162.
    5. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
    6. Hulten, Charles R, 1979. "On the "Importance" of Productivity Change," American Economic Review, American Economic Association, vol. 69(1), pages 126-136, March.
    7. Karl-Göran Mäler, 1991. "National accounts and environmental resources," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 1(1), pages 1-15, March.
    8. Charles R. Hulten, 1978. "Growth Accounting with Intermediate Inputs," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 45(3), pages 511-518.
    9. repec:bla:ecorec:v:78:y:2002:i:243:p:375-80 is not listed on IDEAS
    10. Hulten, Charles R, 1973. "Divisia Index Numbers," Econometrica, Econometric Society, vol. 41(6), pages 1017-1025, November.
    11. Evsey D. Domar, 1963. "Total Productivity and the Quality of Capital," Journal of Political Economy, University of Chicago Press, vol. 71(6), pages 586-586.
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