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

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • 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.
  • Handle: RePEc:tpr:restat:v:91:y:2009:i:1:p:201-212
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    References listed on IDEAS

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    1. Robert E. Lipsey, 1994. "Quality Change and other Influences on Measures of Export Prices of Manufactured Goods and the Terms of Trade between Primary Products and Manufacture," NBER Working Papers 4671, National Bureau of Economic Research, Inc.
    2. Timothy J. Kehoe & Kim J. Ruhl, 2008. "Are Shocks to the Terms of Trade Shocks to Productivity?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 804-819, October.
    3. Diewart, W Erwin & Morrison, Catherine J, 1986. "Adjusting Output and Productivity Indexes for Changes in the Terms of Trade," Economic Journal, Royal Economic Society, vol. 96(383), pages 659-679, September.
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    11. 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, pages 1216-1238.
    12. Rao, D. S. Prasada, 1976. "Existence and Uniqueness of a System of Consistent Index Numbers," Economic Review, Hitotsubashi University, vol. 27(3), pages 212-218, July.
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    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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