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Estimating Real Production and Expenditures across Nations: A Proposal for Improving the Penn World Tables

  • Robert C. Feenstra

    (University of California, Davis, and NBER)

  • Alan Heston

    (University of Pennsylvania)

  • Marcel P. Timmer

    (University of Groningen)

  • Haiyan Deng

    (Conference Board, New York)

We propose a new approach to the international comparison of real GDP, as measured from the output-side. The traditional Gary-Khamis system, which measures real GDP from the expenditure-side, is modified to include differences in the terms of trade between countries. It is shown that this system has a strictly positive solution under mild assumptions. On the basis of a sample of 151 countries in 1996, it is shown that differences between real GDP measured from the expenditure-side and output-side can be substantial, especially for small open economies. We also obtain cross-country measures of "real openness" and the terms of trade. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 91 (2009)
Issue (Month): 1 (February)
Pages: 201-212

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Handle: RePEc:tpr:restat:v:91:y:2009:i:1:p:201-212
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  1. Daron Acemoglu & Jaume Ventura, 2001. "The World Income Distribution," NBER Working Papers 8083, National Bureau of Economic Research, Inc.
  2. Bernard, Andrew B & Jones, Charles I, 1996. "Comparing Apples to Oranges: Productivity Convergence and Measurement across Industries and Countries," American Economic Review, American Economic Association, vol. 86(5), pages 1216-38, December.
  3. Yo Chul Choi & David Hummels & Chong Xiang, 2006. "Explaining Import Variety and Quality: The Role of the Income Distribution," NBER Working Papers 12531, National Bureau of Economic Research, Inc.
  4. W. Erwin Diewert, 1999. "Axiomatic and Economic Approaches to International Comparisons," NBER Chapters, in: International and Interarea Comparisons of Income, Output, and Prices, pages 13-107 National Bureau of Economic Research, Inc.
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