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Who Shrunk China? Puzzles in the Measurement of Real GDP

Author

Listed:
  • Peter Neary
  • Robert C. Feenstra
  • Hong Ma and D.S. Prasada Rao
Abstract
The latest World Bank estimates of real GDP per capita for China are significantly lower than previous ones. We review possible sources of this puzzle and conclude that it reflects a combination of factors, including substitution bias in consumption, reliance on urban prices which we estimate are higher than rural ones, and the use of an expenditure-weighted rather than an output-weighted measure of GDP. Taking all these together, we estimate that real per-capita GDP in China was 50% higher relative to the U.S. in 2005 than the World Bank estimates.

Suggested Citation

  • Peter Neary & Robert C. Feenstra & Hong Ma and D.S. Prasada Rao, 2011. "Who Shrunk China? Puzzles in the Measurement of Real GDP," Economics Series Working Papers 566, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:566
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    References listed on IDEAS

    as
    1. Barnett, William A. & Erwin Diewert, W. & Zellner, Arnold, 2011. "Introduction to measurement with theory," Journal of Econometrics, Elsevier, vol. 161(1), pages 1-5, March.
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    4. Robert C. Feenstra & Alan Heston & Marcel P. Timmer & Haiyan Deng, 2009. "Estimating Real Production and Expenditures across Nations: A Proposal for Improving the Penn World Tables," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 201-212, February.
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    6. Kalyan K. Sanyal & Ronald W. Jones, 2018. "The Theory of Trade in Middle Products," World Scientific Book Chapters, in: International Trade Theory and Competitive Models Features, Values, and Criticisms, chapter 13, pages 203-231, World Scientific Publishing Co. Pte. Ltd..
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    9. Alan Heston, "undated". "What Can Be Learned About the Economies of China and India from Purchasing Power Comparisons?," Indian Council for Research on International Economic Relations, New Delhi Working Papers 229, Indian Council for Research on International Economic Relations, New Delhi, India.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    EKS; Geary-Khamis and GAIA indexes; Gerschrenkron effect; International comparisons of real income and GDP; Measurement economics; Substitution bias;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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