Is the GDP Growth Rate in NIPA a Welfare Measure?

Jorge Durán and Omar Licandro ()
Authors registered in the RePEc Author Service: Jorge Durán

No 665, Working Papers from Barcelona School of Economics

Abstract: The permanent decline of equipment prices relative to nondurable consumption prices rendered fixed-base quantity indexes obsolete, because of the well-known substitution bias. National Income and Product Accounts (NIPA) responded by switching to a flexible-base quantity index to measure GDP growth. We argue this is a welfare measure of output growth. In a two-sector endogenous growth model, we use the Bellman equation to explicitly represent preferences on consumption and investment, we apply a Fisher-Shell true quantity index to this utility representation and show it is equal to the Divisia index, well approximated by the flexible-base quantity index used by NIPA.

Keywords: embodied technical progress; growth measurement; quantity indexes; NIPA (search for similar items in EconPapers)
JEL-codes: C43 D91 O41 O47 (search for similar items in EconPapers)
Date: 2015-09
New Economics Papers: this item is included in nep-dge
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Citations: View citations in EconPapers (1)

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Working Paper: Is the GDP growth rate in NIPA a welfare measure? (2013)
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