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Productivity and the welfare of nations
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Basu, Susanto, Pascali, Luigi, Schiantarelli, Fabio and Serven, Luis (2013) Productivity and the welfare of nations. Working Paper. Coventry, UK: Department of Economics, University of Warwick. Warwick economics research papers series (TWERPS), Volume 2013 (Number 1027).
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Abstract
We show that the welfare of a country ís infinitely-lived representative consumer is summarized,
to a first order, by total factor productivity (TFP) and by the capital stock per capita. These
variables suffice to calculate welfare changes within a country, as well as welfare differences across
countries. The result holds regardless of the type of production technology and the degree of
product market competition. It applies to open economies as well, if TFP is constructed using
domestic absorption, instead of gross domestic product, as the measure of output. Welfare relevant
TFP needs to be constructed with prices and quantities as perceived by consumers, not firms. Thus,
factor shares need to be calculated using after-tax wages and rental rates, and will typically sum
to less than one. These results are used to calculate welfare gaps and growth rates in a sample of
advanced countries with high-quality data on output, hours worked, and capital. We also present
evidence for a broader sample that includes both advanced and developing countries.
| Item Type: | Working or Discussion Paper (Working Paper) | ||||
|---|---|---|---|---|---|
| Alternative Title: | |||||
| Divisions: | Faculty of Social Sciences > Economics | ||||
| Series Name: | Warwick economics research papers series (TWERPS) | ||||
| Publisher: | Department of Economics, University of Warwick | ||||
| Place of Publication: | Coventry, UK | ||||
| Official Date: | September 2013 | ||||
| Dates: |
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| Volume: | Volume 2013 | ||||
| Number: | Number 1027 | ||||
| Number of Pages: | 67 | ||||
| Institution: | University of Warwick | ||||
| Status: | Not Peer Reviewed | ||||
| Publication Status: | Published | ||||
| Related URLs: |
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