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What Do We Really Know about Productivity Differentials across Countries?

The Mismeasurement of Productivity

PERI researcher Jayati Ghosh examines and critiques the most widely used measure of productivity (output per worker employed) and argues that this is a flawed, inadequate and even misleading measure of economic progress. In terms of cross-country comparisons and assessing trends over time, both the numerator (GDP or value added) and the denominator (number of workers or hours worked) have significant conceptual and measurement problems. Ghosh first considers these issues in general. She then focuses on how they impact analyses of productivity differentials in the U.S. and India in the recent period.

Forthcoming in the Review of Radical Political Economics

Abstract

This paper examines and critiques the most widely used measure of productivity (output per worker employed) and argues that this is a flawed, inadequate and even misleading measure of economic progress. In terms of cross-country comparisons and assessing trends over time, both the numerator (GDP or value added) and the denominator (number of workers or hours worked) have significant conceptual and measurement problems. These issues are considered in general, and also with regard to how they affect analyses of productivity differentials in the U.S. and India in the recent period.

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