Aggregate Productivity Loss and the Theil Index of Inequality

Shuhei Aoki ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper suggests that the difference in the Theil indices of inequality between two economies approximately measures the relative loss of aggregate productivity caused by distortions in labor allocation. Moreover, the Theil index itself can be interpreted approximately as the possible maximum loss of aggregate productivity caused by these distortions.

Keywords: inequality; marginal productivity theory; misallocation; productivity; Theil index (search for similar items in EconPapers)
JEL-codes: E25 D33 D61 D24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eff and nep-lab
Date: 2008-03-01
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Persistent link: http://EconPapers.repec.org/RePEc:pra:mprapa:7407

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