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A Welfare-Based Approach to Aggregating Growth Rates across Countries

Author

Listed:
  • Son, Hyun Hwa

    (Asian Development Bank)

Abstract

Aggregating per capita gross domestic product growth across countries has always been a technical problem due to complexities in the relative movements of exchange rates, economic output, and populations. As such, the conventional approach to aggregating growth across countries suffers from sensitivity to exchange rates, as well as from the possibility of aggregate growth rates not being convex combinations of individual growth rates. This paper introduces a new methodology in aggregating per capita growth rates that does not suffer from the drawbacks of the conventional approach. Using a welfare-based approach, it is shown that the proposed methodology is robust with respect to exchange rates and generates weights that always add up to unity, thus avoiding the anomalies that are inherent in the conventional approach. The methodology proposed in the paper is applied to calculate aggregate growth rates of 33 developing member countries as well as five regional groupings, and the results are compared with those arising from the conventional approach. A number of insights arise that were previously hidden or inaccessible.

Suggested Citation

  • Son, Hyun Hwa, 2011. "A Welfare-Based Approach to Aggregating Growth Rates across Countries," ADB Economics Working Paper Series 248, Asian Development Bank.
  • Handle: RePEc:ris:adbewp:0248
    as

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    References listed on IDEAS

    as
    1. Nanak Kakwani, 1997. "Growth Rates Of Per-Capita Income And Aggregate Welfare: An International Comparison," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 201-211, May.
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    More about this item

    Keywords

    aggregate growth rates; exchange rates; per capita gross domestic product; regional groupings; welfare-based approach;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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