Is the GDP growth rate in NIPA a welfare measure?
The permanent decline of equipment prices relative to nondurable consumption prices rendered fixed-base quantity indexes obsolete, because of the well-known substitution bias. National Income and Product Accounts (NIPA) responded by switching to a flexible-base quantity index to measure GDP growth. We argue this is a welfare measure of output growth. In a two-sector endogenous growth model, we use the Bellman equation to explicitly represent preferences on consumption and investment, we apply a Fisher-Shell true quantity index to the this utility representation and show it is equal to the Divisia index, well approximated by the flexible-base quantity index used by NIPA.
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| Date of creation: | 2013 |
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| Handle: | RePEc:red:sed013:191 |
| Contact details of provider: | Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA Web page: http://www.EconomicDynamics.org/ Email: More information through EDIRC
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- Raouf BOUCEKKINE & Fernando DEL RIO & Omar LICANDRO, 2002.
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- BOUCEKKINE, Raouf & DEL RIO, Fernando & LICANDRO, Omar, . "Embodied technological change, learning-by-doint and the productivity slowdown," CORE Discussion Papers RP 1629, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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- Omar Licandro & Javier Ruiz-Castillo & Jorge Duran, 2002.
"The Measurement of Growth under Embodied Technical Change,"
Recherches économiques de Louvain,
De Boeck Université, vol. 68(1), pages 7-19.
- Omar Licandro & Jorge Durán & Javier Ruiz-Castillo, . "The Measurement of Growth under Embodied Technical Change," Working Papers 2001-09, FEDEA.
- Omar LICANDRO & Javier RUIZ-CASTILLO & Jorge DURAN, 2002. "The Measurement of Growth under Embodied Technical Change," Discussion Papers (REL - Recherches Economiques de Louvain) 2002011, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- Omar LICANDRO & Javier RUIZ-CASTILLO & Jorge DURAN, 2001. "The Measurement of Growth under Embodied Technical Change," Economics Working Papers ECO2001/14, European University Institute.
- Charles R. Hulten, 1992. "Growth Accounting When Technical Change is Embodied in Capital," NBER Working Papers 3971, National Bureau of Economic Research, Inc.
- Robert J. Gordon, 1990. "The Measurement of Durable Goods Prices," NBER Books, National Bureau of Economic Research, Inc, number gord90-1.
- Fisher,Franklin M. & Shell,Karl, 1998. "Economic Analysis of Production Price Indexes," Cambridge Books, Cambridge University Press, number 9780521556231, November.
- Matthijs van Veelen & Roy van der Weide, 2008. "A Note on Different Approaches to Index Number Theory," American Economic Review, American Economic Association, vol. 98(4), pages 1722-30, September.
- repec:ucp:bknber:9780226304557 is not listed on IDEAS
- Hulten, Charles R, 1992. "Growth Accounting When Technical Change Is Embodied in Capital," American Economic Review, American Economic Association, vol. 82(4), pages 964-80, September.
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