Who shrunk China? Puzzles in the measurement of real GDP

Working paper

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.

Authors: Neary, P; Feenstra, R; Ma, H; Rao, D

• Publication status: Published
• Publisher: University of Oxford
• Series: Department of Economics Discussion Paper Series
• Publication date: 2011-09-01
• Paper number: 566
• Keywords: substitution bias; EKS; international comparisons of real income and GDP; measurement economics; Geary-Khamis and GAIA indexes; Gerschrenkron effect