At Your Own Risk: Health Warnings for Growth Data

Versions 6.1 and 6.2 of Penn World Tables (PWT) have essentially the same methodology and the same underlying data, but report significantly different growth numbers. It is not the case that 6.2 is better or worse than 6.1; it is inherent in the PWT approach that some data will vary a great deal across versions and there is no way to determine which of the existing versions is “best”. We examine 13 leading studies of growth for “Table Invariant” results that are robust across different versions of PWT. Table Invariant results are common in studies examining cross-sectional or very long run data; in contrast, results based on higher frequency data are less likely to be robust in this sense, and annual data are particularly problematic. This lack of robustness can be attributed in part to poor data quality in lower income countries, which has been flagged in the Tables’ own health warnings. The lack of robustness is also due to the PWT’s methodology for constructing and compiling the data. This methodology renders data for countries with relatively small total GDP and data distant from the current benchmark year especially variable. We propose an alternative way to use PWT data that might be less prone to some of these issues.

[1]  Daniel A. Nuxoll,et al.  Differences in Relative Prices and International Differences in Growth Rates , 1994 .

[2]  R. C. Geary,et al.  A Note on the Comparison of Exchange Rates and Purchasing Power Between Countries , 1958 .

[3]  Paul A. Samuelson,et al.  Facets of Balassa-Samuelson Thirty Years Later , 1994 .

[4]  Robert Summers,et al.  Real GDP per Capita for More Than One Hundred Countries , 1978 .

[5]  Robert Summers,et al.  A NEW SET OF INTERNATIONAL COMPARISONS OF REAL PRODUCT AND PRICE LEVELS ESTIMATES FOR 130 COUNTRIES, 1950–1985 , 1988 .

[6]  Marek Jarocinski,et al.  Determinants of Economic Growth : Will Data Tell ? † , 2008 .

[7]  D. Rao,et al.  Computation of Standard Errors for Geary-Khamis Parities and , 1992 .

[8]  Lant Pritchett,et al.  Growth Accelerations , 2004 .

[9]  Lant Pritchett,et al.  Good Policy or Good Luck? Country Growth Performance and Temporary Shocks , 1993 .

[10]  D. Weil,et al.  A Contribution to the Empirics of Economic Growth Author ( s ) : , 2008 .

[11]  L. Summers,et al.  Equipment Investment and Economic Growth , 1990 .

[12]  R. Feenstra,et al.  Estimating Real Production and Expenditures across Nations: A Proposal for Improving the Penn World Tables , 2004, The Review of Economics and Statistics.

[13]  Angus Deaton,et al.  Understanding Ppps and Ppp-Based National Accounts , 2008 .

[14]  John Quiggin,et al.  True Measures of GDP and Convergence , 1997 .

[15]  E. Miguel,et al.  Economic Shocks and Civil Conflict: An Instrumental Variables Approach , 2004, Journal of Political Economy.

[16]  Benjamin F. Jones,et al.  Do Leaders Matter? National Leadership and Growth Since World War Ii , 2004 .

[17]  Philippe Aghion,et al.  The Effect of Financial Development on Convergence , 2005 .

[18]  Garey Ramey,et al.  Cross-Country Evidence on the Link between Volatility and Growth , 1994 .

[19]  R. Barro.  Determinants of Democracy , 1999 .

[20]  D. Dollar,et al.  Aid, Policies, and Growth , 1997 .

[21]  Salem H. Khamis,et al.  A New System of Index Numbers for National and International Purposes , 1972 .

[22]  Robert Summers,et al.  International Price and Quantity Comparisons: Potentials and Pitfalls , 1996 .

[23]  A. Heston,et al.  A brief review of some problems in using national accounts data in level of output comparisons and growth studies , 1994 .

[24]  R. Summers,et al.  Rationalizing the Penn World Table: True Multilateral Indices for International Comparisons of Real Income , 2004 .

[25]  A. Gerschenkron,et al.  The Soviet Indices of Industrial Production , 1947 .

[26]  Asli Demirgüç-Kunt,et al.  Regulations, Market Structure, Institutions, and the Cost of Financial Intermediation , 2003 .

[27]  S. Dowrick,et al.  The Penn World Table: A Review , 2005 .