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Aggregate Productivity Loss and the Theil Index of Inequality

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  • Aoki, Shuhei

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.

Suggested Citation

  • Aoki, Shuhei, 2008. "Aggregate Productivity Loss and the Theil Index of Inequality," MPRA Paper 7407, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:7407
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    File URL: https://mpra.ub.uni-muenchen.de/7407/1/MPRA_paper_7407.pdf
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    References listed on IDEAS

    as
    1. Cowell, Frank, 2003. "Theil, inequality and the structure of income distribution," LSE Research Online Documents on Economics 2288, London School of Economics and Political Science, LSE Library.
    2. Diego Restuccia & Richard Rogerson, 2008. "Policy Distortions and Aggregate Productivity with Heterogeneous Plants," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 707-720, October.
    3. Sen, Amartya, 1997. "On Economic Inequality," OUP Catalogue, Oxford University Press, number 9780198292975.
    4. Glomm, Gerhard & Ravikumar, B, 1992. "Public versus Private Investment in Human Capital Endogenous Growth and Income Inequality," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 818-834, August.
    5. Stephen L. Parente & Edward C. Prescott, 2002. "Barriers to Riches," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661306, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    inequality; marginal productivity theory; misallocation; productivity; Theil index;
    All these keywords.

    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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