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Who Shrunk China? Puzzles in the Measurement of Real GDP

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  • Robert C. Feenstra
  • Hong Ma
  • J. Peter Neary
  • D.S. Prasada Rao

Abstract

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.

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  • Robert C. Feenstra & Hong Ma & J. Peter Neary & D.S. Prasada Rao, 2012. "Who Shrunk China? Puzzles in the Measurement of Real GDP," NBER Working Papers 17729, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:17729
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    References listed on IDEAS

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    Cited by:

    1. Ali Hosseiny, 2015. "Violation of Invariance of Measurement for GDP Growth Rate and its Consequences," Papers 1507.04848, arXiv.org, revised Aug 2016.
    2. Hajargasht, Gholamreza & Rao, D.S. Prasada, 2019. "Multilateral index number systems for international price comparisons: Properties, existence and uniqueness," Journal of Mathematical Economics, Elsevier, vol. 83(C), pages 36-47.
    3. Deng, Kent & O'Brien, Patrick, 2021. "The Kuznetsian paradigm for the study of modern economic history and the Great Divergence with appendices of literature review and statistical data," LSE Research Online Documents on Economics 108563, London School of Economics and Political Science, LSE Library.
    4. Jean Fouré & Agnès Bénassy-Quéré & Lionel Fontagné, 2012. "The Great Shift : Macroeconomic projections For the World Economy at the 2050 Horizon," Working Papers hal-00962464, HAL.
    5. Jean Fouré & Agnès Bénassy-Quéré & Lionel Fontagné, 2013. "Modelling the world economy at the 2050 horizon," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 21(4), pages 617-654, October.
    6. Douglas L. Campbell, 2014. "Through the Looking Glass: A WARPed View of Real Exchange Rate History," Working Papers w0210, Center for Economic and Financial Research (CEFIR).
    7. Almås, Ingvild & Johnsen, Åshild Auglænd & Kotsadam, Andreaa, 2014. "Poverty in China Seen from Outer Space," Memorandum 11/2014, Oslo University, Department of Economics.
    8. Fadi Hassan, 2014. "The Price of Development," The Institute for International Integration Studies Discussion Paper Series iiisdp446, IIIS.
    9. Hassan, Fadi, 2016. "The price of development: The Penn–Balassa–Samuelson effect revisited," Journal of International Economics, Elsevier, vol. 102(C), pages 291-309.
    10. Ingvild Almås & Anders Kjelsrud, 2016. "Pro-poor Price Trends and Inequality - The Case of India," CESifo Working Paper Series 5740, CESifo.
    11. Deng, Kent & O’Brien, Patrick Karl, 2016. "China’s GDP per capita from the Han Dynasty to communist times," Economic History Working Papers 64857, London School of Economics and Political Science, Department of Economic History.
    12. Robert Inklaar & D. S. Prasada Rao, 2017. "Cross-Country Income Levels over Time: Did the Developing World Suddenly Become Much Richer?," American Economic Journal: Macroeconomics, American Economic Association, vol. 9(1), pages 265-290, January.
    13. Almås, Ingvild & Grewal, Mandeep & Hvide, Marielle & Ugurlu, Serhat, 2017. "The PPP approach revisited: A study of RMB valuation against the USD," Journal of International Money and Finance, Elsevier, vol. 77(C), pages 18-38.
    14. John Morrow & Michael Carter, 2013. "Left, Right, Left: Income, Learning and Political Dynamics," NBER Working Papers 19498, National Bureau of Economic Research, Inc.
    15. Ingvild Almas & Ashild Johnsen, 2018. "The cost of a growth miracle - reassessing price and poverty trends in China," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 30, pages 239-264, October.
    16. Hosseiny, Ali, 2017. "A geometrical imaging of the real gap between economies of China and the United States," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 479(C), pages 151-161.
    17. Robert J. Hill & Iqbal A. Syed, 2015. "Improving International Comparisons of Prices at Basic Heading Level: An Application to the Asia-Pacific Region," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 61(3), pages 515-539, September.
    18. Almås, Ingvild & Kjelsrud, Anders, 2017. "Rags and Riches: Relative Prices, Non-Homothetic Preferences, and Inequality in India," World Development, Elsevier, vol. 97(C), pages 102-121.
    19. Laureti, Tiziana & Prasada Rao, D.S., 2018. "Measuring Spatial Price Level Differences within a Country: Current status and Future Developments /Medición de las diferencias de nivel de precios espaciales dentro de un país: Estado actual y evoluc," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 36, pages 119-148, Enero.
    20. Inklaar, Robert & de Jong, Harmen & Bolt, Jutta & van Zanden, Jan, 2018. "Rebasing 'Maddison': new income comparisons and the shape of long-run economic development," GGDC Research Memorandum GD-174, Groningen Growth and Development Centre, University of Groningen.
    21. Rao, D.S. Prasada, 2018. "Macro-economic Measures for a Globalised World: Global Growth and Inflation," CEI Working Paper Series 2018-11, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    22. Anderson, Kym & Strutt, Anna, 2012. "The changing geography of world trade: Projections to 2030," Journal of Asian Economics, Elsevier, vol. 23(4), pages 303-323.
    23. Kent Deng & Patrick Karl O’Brien, 2014. "Creative Destruction: Chinese GDP per capita from the Han Dynasty to Modern Times," Working Papers 0063, European Historical Economics Society (EHES).

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    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts

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