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Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 20, No. 1, pp.93-128
ISSN: 1225-0279 (Print)
Print publication date 28 Feb 2007
Received 15 Nov 2006 Revised 06 Feb 2007

Productivity Measures and Sustainable Prosperity

W. Erwin Diewert ; Alice O. Nakamura
Professor, Department of Economics, University of British Columbia, Vancouver, BC V6T 1W5, Canada diewert@econ.ubc.ca
Professor, School of Business, University of Alberta, Edmonton, Alberta T6G 2R6, Canada alice.nakamura@ualberta.ca

JEL Classification: C43, C82, D24, D31, D92, E23

Abstract

The government of Korea is striving to achieve more rapid, and sustainable, increases in economic output. We begin by reviewing measures national governments can use to monitor progress toward achieving sustainable prosperity. The various indexes each involve a comparison of some measure of total output volume with a measure of the total volume for specified input factors.

The total output measure most used by national statistical agencies is gross domestic product (GDP). We recommend other output measures that would better capture exchange rate effects, efficiency gains in intermediate product use, and the depreciation of durable assets. The recommendations concerning the treatment of durables are of special relevance for monitoring progress toward sustainable prosperity. We also report on progress toward accounting for the use of natural resource assets and human environmental impacts. We conclude with some thoughts on the meaning of sustainable prosperity and options for achieving this.

Keywords:

Total factor productivity, Multifactor productivity, Labour productivity, Living standards, Real income growth, Gross versus net output, Terms of trade, Capital measurement, Capital services, User costs, Depreciation models, Obsolescence

Acknowledgments

This paper is a revision of a paper presented at the 14th SJE-KERI-KIF International Symposium on “Sustainable Growth in East Asia” organized by Seoul Journal of Economics, Institute of Economic Research, Seoul National University. We thank Robert Feenstra and our Symposium discussants, Professors Hak K. Pyo and Hyunbae Chun, for helpful comments. The authors bear sole responsibility for the interpretations and any remaining errors.

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