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CHAPTF.R T V

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The fir.st e x a m p 1 e 1 s g 1 v a n hy naw w a y s o f r o o 1.1 n g f 1 sca 1 1 ncant.1 vaa. Tn what. foliowa we rievel op t.wo casas.

(I)    ?«ward8_to_ rft«i_ont£|H tgrowt h .. S t.a t i a 1.1 d a ns ara faul 11 ar

wlt.h t.ha maasurement. of raal oiitput growt.h . Raal    outpiit.

growt.h 1 a aaaanrad t.hrough a rat.lo, the danoulnator of whlnh i a gl van hy t. h e v a 1 o a addad In a g 1 v a n year, w h 1 1 a t. h a n ii mera tor 1 a a norę o o m p 1 a x. expras8lon, t. h a t 1a t.ha dl f farence ha twa en t.ha salas of t.ha 8uhaequent. year deflated hy an 1ndax of outpiit. prlca Rinna t.ha Ronay . va1na of- purchasaa of t.ha aaia yaar, deflat.ed hy an 1ndex - of -Input.s    prlnaa. Our

suggest.lon la to est.lnat.e a a 111 1 ar nagnl tnda at. t.ha lavel of firma, uslng t.h 18 paramet.er as a hasła for t.ax rahatas. Wa ara cnnaci ona of t.ha diffloult.y of t.ha t.ask; howavar 1t. ran ha parforiftd exact.ly In t.ha same way as ast.1iat.1ng natlonal outpiit. Tt. la dlffloult., hut 1s naual ly dona! Tha flrras whlch ara 1nt.arast.ad In gat. tlng flscal heneflt.s In t.h 1 s way, should daolara t.ha 1nt.ent.1on t.o do s o , and o o 1 1 a c t. , nndar t.ha eon troi of fi scal author i t. i es ‘ and wlt.h t.ha technlcal asslst.ance of t.han, tha necessary aocountlng Information.

(II)    Rftwards__for_t.ha___£*£*1" s J^n o f_____capa city . Al t.hough f i rms

hava thalr own not.lon of what conat.1t.utas oapaolt.y, t.hls lagnlt.nda 1 a dlffloult. t.o ha ast.1mat.ad hy a t.hlrd party. Tharafora, ona 1 a ohligad t.o nae 1 ndlrect. ev1denoe. Ona of t.ham 1s gi ven hy t.ha axpans1on of raal ont.piit; howevar, 1n t.hls oasa wa ara hack to t.ha acheme out 11 nad nndar (i) ahove. Anothar way la t.o deduce t.hls Information hy t.ha a ot na 1 In ora asa In lahour st.ock, nndar t.ha asaumpt. 1on that. an axpans1on of oapadt.y Ir 11 kały to reqn1re an Incraasa In tha lahour st.ock. Rut. t.hls daduot.lon 1s not. nacassarlly t.rna, sińca employment. cnn ha Incraased, also hy ma 1 nt.a 1 n 1 ng t.ha sama leval of prodnctl va oapaolt.y whan tha t.ha laf.t.er Ir, as 1t. nsnally happens , underu1.1 1 1 7.ed . Purthanora, 1f t.hara 1s an Increaalng oapaolt.y hut t.hls Ir aasodated to a prooass of snhs1.1 t.nt. 1 on of maohlnas for lahour, t.ha laval of amploymant. co u ld reialn    st.aady or a v a n dlminlsh. Snhsidlzlng an

Incraafilng amploymant., howavar, would not. ha a nagat.1 va att.1t.uda In any oaSa, g1 van t.ha high laval of unemp 1 oyman t..

A t.hlrd way 1s t.hat. of conhlnlng t.ha av1danca ahout. an Incraasa In amploymant. wlt.h a rat.a of Incraasa 1 n t.ha 1nveat.ment. fi owa ahove cart.aln targat. valuas (a.g. tha average rata of growt.h of 1nveat.ment. In t.ha sact.or, a pra- det.ermlned arhlt.rary valua, etfi. ) . Tha Incraasa In 1 nvest.ment. , however, should ha maasnrad In raa 1 terma; t.harafora, approprlat.e Information ahout. prlca 1ndaxas of Capital Input.s should ha mada ava11ahla. Furtharmora, a yaarly rat.a of growt.h is not. ault.ahle for 1t. could produoa artif Idal dalay of 1nvest.ment.s and a strategie ooncant.ra1.1 on of t.ham In a oertaln yaar, In order t.o hava a rat.a of growt.h of 1 nvast.mant.s largar t.han t.ha ast.ahllshad standard t.hreshold. Ona way of coplng wlt.h t.hls diffloult.y would ha to raly upon maasuras of avaraga rat.es of growt.h In a period of savaral yaars, a.g. t.hraa yaars.