Mismeasuring Long Run Growth. The Bias from Spliced National Accounts

35 Pages Posted: 25 Sep 2014

See all articles by Leandro Prados de la Escosura

Leandro Prados de la Escosura

Universidad Carlos III de Madrid - Faculty of Social Sciences and Law; Centre for Economic Policy Research (CEPR)

Date Written: September 2014

Abstract

Comparisons of economic performance over space and time largely depend on how statistical evidence from national accounts and historical estimates are spliced. To allow for changes in relative prices, GDP benchmark years in national accounts are periodically replaced with new and more recent ones. Thus, a homogeneous long-run GDP series requires linking different temporal segments of national accounts. The choice of the splicing procedure may result in substantial differences in GDP levels and growth, particularly as an economy undergoes deep structural transformation. An inadequate splicing may result in a serious bias in the measurement of GDP levels and growth rates. Alternative splicing solutions are discussed in this paper for the particular case of Spain, a fast growing country in the second half of the twentieth century. It is concluded that the usual linking procedure, retropolation, has serious flows as it tends to bias GDP levels upwards and, consequently, to underestimate growth rates, especially for developing countries experiencing structural change. An alternative interpolation procedure is proposed.

Keywords: growth measurement, historical national accounts, Spain, splicing GDP

JEL Classification: C82, E01, N13, O47

Suggested Citation

Prados de la Escosura, Leandro, Mismeasuring Long Run Growth. The Bias from Spliced National Accounts (September 2014). CEPR Discussion Paper No. DP10137, Available at SSRN: https://ssrn.com/abstract=2501620

Leandro Prados de la Escosura (Contact Author)

Universidad Carlos III de Madrid - Faculty of Social Sciences and Law ( email )

Getafe (Madrid), 28903
Spain
+34916249623 (Phone)

HOME PAGE: http://www.uc3m.es/portal/page/portal/dpto_historia_economica_inst/home/faculty/leandro_prados_escos

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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