When it comes to measuring GDP, researchers tend to use the latest vintage of the Penn World Tables. However, competing series like the World Development Indicators (WDI) and changing methodologies between vintages mean this is not necessarily the best approach. This column assesses the relative performance of different GDP estimators using night-time lights as an unbiased predictor of the growth rates of unobserved true income. Newer versions of the Penn Tables are not necessarily improvements on their direct predecessors. Newer versions of the WDI index, especially the 2011 vintage, appear generally better at measuring cross-country income differences.
Maxim Pinkovskiy, Xavier Sala-i-Martin, 26 June 2016
Christian Hansen, 27 May 2016
Big data is changing economics and the way causal relationships are studied. In this video, Christian Hansen and Soumaya Keynes discuss the importance of big data for econometrics. Big data offers a lot of information and it is easier to draw policy lessons. It also gives more flexibility without forcing researchers to impose control variables, allowing more reliable conclusions to be obtained. This video was recorded in March 2016 during the Royal Economic Society’s Annual Conference held at the University of Sussex.
Diane Coyle, 08 February 2016
Digital technologies are having dramatic impacts on consumers, businesses, and markets. These developments have reignited the debate over the definition and measurement of common economic statistics such as GDP. This column examines the measurement challenges posed by digital innovation on the economic landscape. It shows how existing approaches are unable to capture certain elements of the consumer surplus created by digital innovation. It further demonstrates how they can misrepresent market-level shifts, leading to false assessments of production and growth.
Timothy Sturgeon, 20 May 2015
With global value chains that fragment production across the world, national statistics fail to capture the growing interconnectedness of economies. This column describes the international input-output tables that allow researchers to estimate the share of a country’s export value derived from imported inputs. However, while these tools offer promising uses, at the moment statistics on trade in value added should be treated with great caution.
Leandro Prados de la Escosura, 27 September 2014
As demonstrated by the dramatic upward revision of Nigeria’s GDP for 2013, the choice of a benchmark year matters when computing GDP statistics. This column explains how the replacement of benchmark years creates an inconsistency between new and old national accounts series, and how different ways of resolving this inconsistency yield very different estimates of historical GDP levels and growth rates. When used to evaluate the relative historical performance of Spain and France, the interpolation procedure for splicing national accounts produces more plausible results than the conventional ‘retropolation’ approach.
Jeffrey Frankel, 09 May 2014
Many claim that China will soon overtake the US. This column argues that this claim is based on a misuse of statistics. ICP price data is necessary to compare living standards, since a dollar’s worth of yuan buys more in China than a dollar buys in the US. But the fact that rice and clothes are cheap in rural China does not make the Chinese economy larger. What matters for size in the world economy is how much a yuan can buy on world markets. Using the correct prices, the US remains the world’s largest economic power by a substantial margin.
Zhi Wang, Shang-Jin Wei, Kunfu Zhu, 16 April 2014
One common measure of trade linked international production networks is the so-called VAX ratio, i.e. the ratio of value-added exports to gross exports. This column argues that this measure is not well-behaved at the sector, bilateral, or bilateral sector level, and does not capture important features of international production sharing. A new gross trade accounting framework is proposed that can better track countries’ movements up and down global value chains.
Zhi Wang, Shang-Jin Wei, Kunfu Zhu, 07 April 2014
The growth of international trade in intermediate inputs means that standard trade statistics can give a misleading picture of the real patterns of production behind world trade. This column introduces an accounting framework that decomposes traditional trade flows into components that better reflect the underlying location of the value addition linked to exports.