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Mismeasuring long run growth : the bias from spliced national accounts

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  • Prados de la Escosura, Leandro

Abstract

Comparisons of economic performance over space and time largely depend on how statistical evidence from national accounts and historical estimates are spliced. To allow for changes in relative prices, GDP benchmark years in national accounts are periodically replaced with new and more recent ones. Thus, a homogeneous long-run GDP series requires linking different temporal segments of national accounts. The choice of the splicing procedure may result in substantial differences in GDP levels and growth, particularly as an economy undergoes deep structural transformation. An inadequate splicing may result in a serious bias in the measurement of GDP levels and growth rates. Alternative splicing solutions are discussed in this paper for the particular case of Spain, a fast growing country in the second half of the twentieth century. It is concluded that the usual linking procedure, retropolation, has serious flows as it tends to bias GDP levels upwards and, consequently, to underestimate growth rates, especially for developing countries experiencing structural change. An alternative interpolation procedure is proposed.

Suggested Citation

  • Prados de la Escosura, Leandro, 2014. "Mismeasuring long run growth : the bias from spliced national accounts," IFCS - Working Papers in Economic History.WH wp14-04, Universidad Carlos III de Madrid. Instituto Figuerola.
  • Handle: RePEc:cte:whrepe:wp14-04
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    References listed on IDEAS

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    1. Angel de la Fuente, 2012. "Series enlazadas de empleo y VAB para España, 1955-2010 (RegDat_Nac versión 3.1)," UFAE and IAE Working Papers 919.12, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    2. Angel De la Fuente, 2012. "Series enlazadas de empleo y VAB para Espana, 1955-2010," Working Papers 1225, BBVA Bank, Economic Research Department.
    3. Robert C. Feenstra & Robert Inklaar & Marcel P. Timmer, 2015. "The Next Generation of the Penn World Table," American Economic Review, American Economic Association, vol. 105(10), pages 3150-3182, October.
    4. Cassing, Shirley, 1996. "Correctly Measuring Real Value Added," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 42(2), pages 195-206, June.
    5. Angel de la Fuente, 2012. "Series enlazadas de empleo y VAB para España, 1955-2010 (RegDat_Nac versión 3.0)," UFAE and IAE Working Papers 894.12, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
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    Keywords

    Growth measurement;

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913

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