Who Shrunk China? Puzzles in the Measurement of Real GDP
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.
We thank Robert Inklaar for his helpful comments as well as participants at an April 2010 conference in Oxford. George Dan provided excellent research assistance. This research received support through NSF Grant No. 27-3457-00-0-79-195 for the project entitled "Integrating Expenditure and Production Estimates in International Comparisons." The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Robert C. Feenstra & Hong Ma & J. Peter Neary & D.S. Prasada Rao, 2013. "Who Shrunk China? Puzzles in the Measurement of Real GDP," Economic Journal, Royal Economic Society, vol. 123(12), pages 1100-1129, December. citation courtesy of