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Aggregate Productivity Loss and the Theil Index of Inequality

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

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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.

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