GDP, Technical Change, and the Measurement of Net Income: The Weitzman Model Revisited

42 Pages Posted: 4 Jun 2010

See all articles by Charles R. Hulten

Charles R. Hulten

University of Maryland - Department of Economics; National Bureau of Economic Research (NBER)

Paul Schreyer

Organization for Economic Co-Operation and Development (OECD) - National Accounts and Structural Economic Statistics Division

Date Written: May 2010

Abstract

We show how technical change, measured as a shift in the GDP function, is combined with net income to track welfare change. This provides a bridge between the productivity literature and the welfare-related literature that tends to reason in terms of net product functions: although the relevant income measure is net of depreciation, productivity is measured based on gross output. We show that net product, net income, net expenditure and productivity change are complements, not substitutes. We also examine whether holding gains and losses should be part of depreciation and conclude that in a general equilibrium setting, either productivity change or holding gains should be part of an extended Weitzman-type net income measure, but not both.

Suggested Citation

Hulten, Charles R. and Schreyer, Paul, GDP, Technical Change, and the Measurement of Net Income: The Weitzman Model Revisited (May 2010). NBER Working Paper No. w16010, Available at SSRN: https://ssrn.com/abstract=1612605

Charles R. Hulten (Contact Author)

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Paul Schreyer

Organization for Economic Co-Operation and Development (OECD) - National Accounts and Structural Economic Statistics Division ( email )

Paris
France

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