Aggregate Productivity Loss and the Theil Index of Inequality

Aoki, Shuhei (2008): Aggregate Productivity Loss and the Theil Index of Inequality. Unpublished.

Abstract

This paper suggests that the difference in the Theil indices of inequality between two economies approximately measures the relative loss of aggregate productivity caused by distortions in labor allocation. Moreover, the Theil index itself can be interpreted approximately as the possible maximum loss of aggregate productivity caused by these distortions.

• Item Type: MPRA Paper
• Language: English
• Keywords: inequality; marginal productivity theory; misallocation; productivity; Theil index
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E25 - Aggregate Factor Income Distribution; D - Microeconomics > D3 - Distribution > D33 - Factor Income Distribution; D - Microeconomics > D6 - Welfare Economics > D61 - Allocative Efficiency; Cost-Benefit Analysis; D - Microeconomics > D2 - Production and Organizations > D24 - Production; Cost; Capital and Total Factor Productivity; Capacity

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