Winkler, Julian (2022): Accounting for variety.
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Abstract
I introduce a general method to account for the distribution of underlying components (variety) of an aggregate quantity, using the notion of entropy. This accounting decomposition enables a number of insightful applications for index numbers in economics. The crossentropy of GDP with respect to a benchmark captures the change in its distribution, and thus how well this benchmark matches data for price and volume indices across time. This 'error' changes demonstrably over time. Accounting of variety also lends itself to an decomposition of labour productivity growth by a technology component (how many more `average' goods are produced per unit of labor?), an allocation component (does the distribution of labor inputs converge to the distribution of outputs?), and cost disease (does the distribution of expenditures diverge from the distribution of outputs?).
Item Type:  MPRA Paper 

Original Title:  Accounting for variety 
Language:  English 
Keywords:  National accounting, beyond GDP, entropy, misallocation 
Subjects:  E  Macroeconomics and Monetary Economics > E0  General > E01  Measurement and Data on National Income and Product Accounts and Wealth ; Environmental Accounts O  Economic Development, Innovation, Technological Change, and Growth > O4  Economic Growth and Aggregate Productivity > O47  Empirical Studies of Economic Growth ; Aggregate Productivity ; CrossCountry Output Convergence 
Item ID:  113174 
Depositing User:  Mr Julian Winkler 
Date Deposited:  27 May 2022 13:26 
Last Modified:  27 May 2022 13:26 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/113174 
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