Rethinking growth and inequality in the US: What is the role of measurement of GDP?

Remzi Baris Tercioglu ()
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Remzi Baris Tercioglu: Department of Economics, New School for Social Research

No 1906, Working Papers from New School for Social Research, Department of Economics

Abstract: Five sectors have increased their contribution to US growth post-1973: Professional-business services (PBS), finance, information, healthcare, and arts-entertainment. Among these services, finance, healthcare, and PBS have questionable foundations to be regarded as final consumption. The paper develops a sectoral explanation to stagnation in median income and wages since the mid-1970s by treating finance, healthcare, and PBS as intermediate consumption of the economy. The adjusted real output growth per annum is 16% lower than the real GDP growth over 1973-2017, yet the decline is 5% over 1947-1973. Consumption share of GDP declines from 63% in 1947 to 61% in 2016 after adjustments despite rising consumerism over the same period. On the income side, the compensation of employees (CE) share of output declines sharply after the 1980s as more than 90% of the expenditures on finance, healthcare and PBS are financed out of the CE. The paper contributes to growth and inequality literature by introducing a new measure of real output growth.

Keywords: National income accounting; measurement of real output growth; functional distribution of income; labor productivity; inequality (search for similar items in EconPapers)
JEL-codes: D33 E01 E25 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2019-06, Revised 2020-02
New Economics Papers: this item is included in nep-mac
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http://www.economicpolicyresearch.org/econ/2019/NSSR_WP_062019.pdf First version, 2019 (application/pdf)

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