 Productivity and the Welfare of NationsSusanto Basu, Luigi Pascali and Fabio Schiantarelli No 270432, Economic Research Papers from University of Warwick - Department of Economics Abstract: We show that the welfare of a countryís inÖnitely-lived representative consumer is summarized, to a Örst order, by total factor productivity (TFP) and by the capital stock per capita. These variables su¢ ce to calculate welfare changes within a country, as well as welfare di§erences across countries. The result holds regardless of the type of production technology and the degree of product market competition. It applies to open economies as well, if TFP is constructed using domestic absorption, instead of gross domestic product, as the measure of output. Welfare relevant TFP needs to be constructed with prices and quantities as perceived by consumers, not Örms. Thus, factor shares need to be calculated using after-tax wages and rental rates, and will typically sum to less than one. These results are used to calculate welfare gaps and growth rates in a sample of advanced countries with high-quality data on output, hours worked, and capital. We also present evidence for a broader sample that includes both advanced and developing countries. Keywords: Financial; Economics (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ags:uwarer:270432 Access Statistics for this paper More papers in Economic Research Papers from University of Warwick - Department of Economics |
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