Depreciation and welfare divergence: An empirical analysis of net domestic productivity growth

In this paper, welfare growth is estimated according to net domestic product (NDP)-based labour productivity growth across industries and sectors in Canada and the United States for the period of 1987 to 2003. Analyses of the growth in aggregate and per hour gross output, depreciation, and net output are undertaken. The results indicate that welfare gains were overestimated by gross domestic product (GDP)-based labour productivity growth. Moreover, the rapid rise of depreciation limited welfare gains, as an increasing amount of gross output was allocated toward capital maintenance.