DP8592 Who Shrunk China? Puzzles in the Measurement of Real GDP
|Author(s):||Robert Feenstra, Hong Ma, J Peter Neary, DS Prasada Rao|
|Publication Date:||October 2011|
|Keyword(s):||EKS, Geary-Khamis and GAIA Indexes, Gerschenkron Effect, International comparisons of real income and GDP, Measurement economics, substitution bias|
|JEL(s):||C43, F10, O53|
|Programme Areas:||International Trade and Regional Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=8592|
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.