Penn World Table
Encyclopedia
The Penn World Table is a set of national-accounts
data developed and maintained by scholars at the University of Pennsylvania
to measure real GDP
(per capita) from the corresponding relative price level
s across countries and over time. Successive updates have added countries (currently almost 190), years (1950-2009), demographic data, and capital-stock
estimates.
A common practice for comparing GDPs across countries has been conversion to a common currency by multiplication of exchange rate
s, as though one price — measured by the common-currency exchange rates — thereby prevails across countries, that is, purchasing power parity
of each currency. By contrast, PWT estimates employ detailed price indexes within each country for different output categories relative to those of the common-currency country, regardless of whether the output is traded internationally (say, computers) or not (say, haircuts). In so doing, it thereby "corrects" GDP to better approximate purchasing power parity.
An empirical finding documented extensively by PWT is the "Penn effect
" of exchange-rate measures for real GDP measured by exchange-rate conversions significantly overstating output differences between high- and low-income countries on average.
National accounts
National accounts or national account systems are the implementation of complete and consistent accounting techniques for measuring the economic activity of a nation. These include detailed underlying measures that rely on double-entry accounting...
data developed and maintained by scholars at the University of Pennsylvania
University of Pennsylvania
The University of Pennsylvania is a private, Ivy League university located in Philadelphia, Pennsylvania, United States. Penn is the fourth-oldest institution of higher education in the United States,Penn is the fourth-oldest using the founding dates claimed by each institution...
to measure real GDP
Real GDP
Real Gross Domestic Product is a macroeconomic measure of the value of output economy adjusted for price changes . The adjustment transforms the money-value measure, called nominal GDP, into an index for quantity of total output...
(per capita) from the corresponding relative price level
Price level
A price level is a hypothetical measure of overall prices for some set of goods and services, in a given region during a given interval, normalized relative to some base set...
s across countries and over time. Successive updates have added countries (currently almost 190), years (1950-2009), demographic data, and capital-stock
Capital (economics)
In economics, capital, capital goods, or real capital refers to already-produced durable goods used in production of goods or services. The capital goods are not significantly consumed, though they may depreciate in the production process...
estimates.
A common practice for comparing GDPs across countries has been conversion to a common currency by multiplication of exchange rate
Exchange rate
In finance, an exchange rate between two currencies is the rate at which one currency will be exchanged for another. It is also regarded as the value of one country’s currency in terms of another currency...
s, as though one price — measured by the common-currency exchange rates — thereby prevails across countries, that is, purchasing power parity
Purchasing power parity
In economics, purchasing power parity is a condition between countries where an amount of money has the same purchasing power in different countries. The prices of the goods between the countries would only reflect the exchange rates...
of each currency. By contrast, PWT estimates employ detailed price indexes within each country for different output categories relative to those of the common-currency country, regardless of whether the output is traded internationally (say, computers) or not (say, haircuts). In so doing, it thereby "corrects" GDP to better approximate purchasing power parity.
An empirical finding documented extensively by PWT is the "Penn effect
Penn effect
The Penn effect is the economic finding associated with what became the Penn World Table that real income ratios between high and low income countries are systematically exaggerated by gross domestic product conversion at market exchange rates...
" of exchange-rate measures for real GDP measured by exchange-rate conversions significantly overstating output differences between high- and low-income countries on average.