Real GDP in Pre-War East Asia: A 1934-36 Benchmark Purchasing Power Parity Comparison with the U.S
This article provides estimates of purchasing power parity (PPP) converters for expenditure side GDP of Japan/China and Japan/U.S through a detailed matching of prices for more than 50 types of goods and services in private consumption and about 20 items or sectors for investment and government expenditure. Based on our finding and linking with the earlier studies on the relative price levels of Taiwan and Korea, we derive the mid-1930s benchmark PPP adjusted per capita income of Japan, China, Taiwan and Korea at 31%, 10%, 23%, and 12% of the U.S. level respectively for the mid-1930s. These estimates corrected the consistent downward bias in East Asian income levels based on market exchange rate conversions. While confirming Angus Maddison's estimates for China and Taiwan based on the 1990 benchmark back-projection method, they do point to a 23% and 85% overestimate in his comparable figures for Japan and Korea respectively for the mid-1930s period. This article develops a preliminary theoretical and empirical framework to demonstrate the possible source of the biases in the back-projection method. We briefly discuss the implications of our findings on the initial conditions and long-term growth dynamics in East Asia and beyond.
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