Productivity and the Welfare of Nations

Susanto Basu, Luigi Pascali, Fabio Schiantarelli and Luis Servén
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Susanto Basu: Boston College and NBER

CAGE Online Working Paper Series from Competitive Advantage in the Global Economy (CAGE)

Abstract: We show that the welfare of a countrys innitely-lived representative consumer is summarized, to arst 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 rms. 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: Productivity; Welfare; TFP; Solow Residual. (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-eff, nep-gro and nep-opm
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Citations: View citations in EconPapers (5)

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http://www2.warwick.ac.uk/fac/soc/economics/resear ... 163-2013_pascali.pdf

Related works:
Journal Article: Productivity and the Welfare of Nations (2022)
Working Paper: Productivity and the Welfare of Nations (2020)
Working Paper: Productivity and the Welfare of Nations (2020)
Working Paper: Productivity and the Welfare of Nations (2016)
Working Paper: Productivity and the Welfare of Nations (2013)
Working Paper: Productivity and the Welfare of Nations (2012)
Working Paper: Productivity and the Welfare of Nations (2012)
Working Paper: Productivity and the Welfare of Nations (2012)
Working Paper: Productivity and the welfare of nations (2012)
Working Paper: Productivity and the welfare of nations (2012)
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