Accounting for Growth in the Age of the Internet The Importance of Output-Saving Technical Change

Charles R. Hulten and Leonard Nakamura

No 17-24, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: We extend the conventional Solow growth accounting model to allow innovation to affect consumer welfare directly. Our model is based on Lancaster?s New Approach to Consumer Theory, in which there is a separate ?consumption technology? that transforms the produced goods, measured at production cost, into utility. This technology can shift over time, allowing consumers to make more efficient use of each dollar of income. This is ?output-saving? technical change, in contrast to the Solow TFP ?resource-saving? technical change. One implication of our model is that living standards can rise at a greater rate than real GDP growth.

Keywords: consumers; accounting; consumer welfare; GDP (search for similar items in EconPapers)
JEL-codes: E01 O3 O4 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2017-07-31
New Economics Papers: this item is included in nep-gro, nep-ino and nep-mac
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Citations: View citations in EconPapers (6)

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Working Paper: Accounting for Growth in the Age of the Internet: The Importance of Output-Saving Technical Change (2017)
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