Output, Income and Welfare of Nations: Concepts and Measurement

Abstract:     
The paper discusses conceptual errors in the methodologies for computing the national income and product accounts (NIPAs). Recent changes in methodology introduced by the statistical agencies have not touched some of these deficiencies and in other cases have substituted new problems for old ones. Unresolved conceptual problems involve the computation of GDP sectors in real terms, the definition of the GDP deflator and real national income, among others. The paper is addressed to: a. the producers of NIPA statistic, hoping to motivate them to improve their methods, b. the users of these statistics who should know exactly what they are getting and make optimal choices among the available alternatives. The paper also clarifies some general issues pertaining to the construction of price and quantity indexes.

Keywords: Economic growth, GDP deflator, price index, quanity index, real GDP, welfare measurement

JEL Classification: C43, C82, D61

Accepted Paper Series