A note on unproductive activities


Traffic jams are a type of Directly Unproductive Profit-seeking Activity. An average driver in Sao Paulo spends almost 11 days in a traffic jam per year.

27th March 2018

Innovation in Latin America is not producing economic growth. Somewhere, the channel that goes from innovation to increased productivity and then to more economic growth, is breaking down. The statistics on this are telling.
Total Factor Productivity measures how efficiently an economy uses its inputs for production. Between 2000 and 2016, the region has been one of the worst global performers on this indicator.

At the same time, economic growth in the region over the past 15 years increased at a sluggish 2.7 percent per year.
There are several explanations for this colossal problem. The pervasive existence of Directly Unproductive Profit-seeking Activities is one of them.
Economist Jagdish Bhagwati coined the term Directly Unproductive Profit-seeking Activities, or Dup, to name processes that use real capital and labor resources to make a pecuniary profit or income, but produce no output, directly or indirectly. He also included in this definition activities designated to secure rents on quotas, prices or regulatory restrictions[i].
Dup are a real enemy. Corruption would be one such activity. Transferring corporate moneys to a public officer will not increase production – nor GDP -. In the short-run, it’s likely that the receiving party will conceal the proceeds of the illicit operation if the amounts exceed a certain threshold. Bribes cannot be quickly spent domestically in conspicuous consumption or investment.
Corruption might at times seem to “grease the wheels” of …

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