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Productivity Paradoxes and Their Resolution

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Abstract

Foran objective function, how should each argument be assigned itsappropriate role in the change of the objective function, whenthe arguments are interrelated? In this paper, it is shown thatthe commonly used approaches may lead to results contradictoryto straightforward economic reasoning, and hence generating paradoxes.We begin with a known paradox of structural change—whenan increase in the relative weight of inexpensive goods appearsformally to generate an increase in average price. A new methodof partitioning changes in an objective function is introducedthat eliminates such paradoxes. Our method is illustrated withnumerical examples.

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Authors and Affiliations

  1. Israel Institute of Technology, Technion, Haifa, Israel

    Shlomo Maital

  2. Netanya Academic College, Netanya, Israel

    Alexander Vaninsky

Authors
  1. Shlomo Maital
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  2. Alexander Vaninsky
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Maital, S., Vaninsky, A. Productivity Paradoxes and Their Resolution. Journal of Productivity Analysis 14, 191–207 (2000). https://doi.org/10.1023/A:1026542719694

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  • DOI: https://doi.org/10.1023/A:1026542719694

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