GDP (per capita) is the most frequently used indicator for measuring the economic performance of countries, which is a central driver of well-being. Not only because higher income per person means higher material standards of living, but also because income is needed for spending on non-material components of well-being, such ...
(Show more)GDP (per capita) is the most frequently used indicator for measuring the economic performance of countries, which is a central driver of well-being. Not only because higher income per person means higher material standards of living, but also because income is needed for spending on non-material components of well-being, such as education and health. If we use current prices to construct GDP, it measures the value of goods and services produced within a country for a given year. If we convert it to constant prices makes it possible to calculate the growth of GDP (output produced in a country) over time or the differences between countries across space. And if we compare the constant GDP series to the current GDP series for a given country, we can analyse price level movements between countries, that is, the relative cost of a basket of goods and services across countries over time.
However, the only available GDP figures for a global set of countries prior to 1950, are those of Maddison (2001, 2003; updated in 2013 by the Maddison-Project, see Bolt and van Zanden, 2013) which are purchasing-power-parity (PPP) adjusted and expressed in constant (1990) international prices. Recently, Chen et al. (2007) have collected nominal GDP series for 11 currently developed countries between 1870 and 2004, and constructed data set on long run price levels using Maddison’s (2003) constant series. They use that test for price level convergence between these countries.
In this paper we will take a similar approach but widen the scope to a global set of countries. We start by introducing a newly constructed historical database on current price GDP series for a global set of countries. Second, we will test for global price level convergence.
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