IDEAS home Printed from https://ideas.repec.org/p/ehl/lserod/124315.html
   My bibliography  Save this paper

To chain or not to chain? measuring real GDP in the US and the choice of index number

Author

Listed:
  • Oulton, Nicholas

Abstract

National Statistical Institutes (NSIs) in advanced countries have generally adopted chain-linking in their national accounts. The United States uses a chained Fisher, an example of a superlative index number, in its national accounts. However the Fisher is only one of an infinite number of superlative index numbers. So an important issue is how sensitive are the estimates of output growth to the choice of index number. This issue is analysed by examining data from the BEA/BLS industry-level integrated production account, 1987–2020. Estimates of superlative and other index numbers are presented for this dataset. The sensitivity of real GDP growth to the value of the crucial parameter in a superlative index number is tested. The extent to which the desirable characteristics of value consistency and aggregation consistency are satisfied for different superlative index numbers is also analysed. The desirability of chain-linking does not follow automatically just from the use of superlative indices. So I also compare chained and unchained versions of these same index numbers. Finally, Europe uses a different approach to output measurement to the US, chained Laspeyres versus chained Fisher. I look at how different US estimates would be if they employed European methodology.

Suggested Citation

  • Oulton, Nicholas, 2025. "To chain or not to chain? measuring real GDP in the US and the choice of index number," LSE Research Online Documents on Economics 124315, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:124315
    as

    Download full text from publisher

    File URL: http://eprints.lse.ac.uk/124315/
    File Function: Open access version.
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Barnett, William A. & Erwin Diewert, W. & Zellner, Arnold, 2011. "Introduction to measurement with theory," Journal of Econometrics, Elsevier, vol. 161(1), pages 1-5, March.
    2. Lisbeth Funding la Cour, 1995. "A Component® based Analysis of the danish Long-run Money Demand Relation," Discussion Papers 95-18, University of Copenhagen. Department of Economics.
    3. Santos, João & Domingos, Tiago & Sousa, Tânia & St. Aubyn, Miguel, 2016. "Does a small cost share reflect a negligible role for energy in economic production? Testing for aggregate production functions including capital, labor, and useful exergy through a cointegration-base," MPRA Paper 70850, University Library of Munich, Germany.
    4. Muhammad Ali Chaudhary & Eatzaz Ahmad & Abid A. Burki & Mushtaq A. Khan, 1999. "Industrial Sector Input Demand Responsiveness and Policy Interventions," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 38(4), pages 1083-1100.
    5. Claude Hillinger, 2002. "A General Theory of Price and Quantity Aggregation and Welfare Measurement," CESifo Working Paper Series 818, CESifo.
    6. McGath, Christopher & McElroy, Robert G. & Strickland, Roger & Traub, Larry & Convey, Theodore & Short, Sara D. & Johnson, James & Green, Report & Ali, Mir B. & Vogel, Stephen, 2009. "Forecasting Farm Income: Documenting USDA's Forecast Model," Technical Bulletins 184311, United States Department of Agriculture, Economic Research Service.
    7. W. Erwin Diewert & Robert C. Feenstra, 2021. "Estimating the Benefits of New Products," NBER Chapters, in: Big Data for Twenty-First-Century Economic Statistics, pages 437-473, National Bureau of Economic Research, Inc.
    8. Thomas von Brasch & Håkon Grini & Magnus Berglund Johnsen & Trond Christian Vigtel, 2021. "An exact additive decomposition of the weighted arithmetic mean," Discussion Papers 944, Statistics Norway, Research Department.
    9. Redding, Stephen J. & Weinstein, David E., 2016. "A unified approach to estimating demand and welfare," LSE Research Online Documents on Economics 67681, London School of Economics and Political Science, LSE Library.
    10. Yu Chen & Chen Zhen, 2022. "The potential impact of reducing sodium in packaged food: The case of the Chinese instant noodles market," Agribusiness, John Wiley & Sons, Ltd., vol. 38(1), pages 3-20, January.
    11. David Rezza Baqaee & Emmanuel Farhi, 2019. "The Macroeconomic Impact of Microeconomic Shocks: Beyond Hulten's Theorem," Econometrica, Econometric Society, vol. 87(4), pages 1155-1203, July.
    12. Diewert, Erwin & Shimizu, Chihiro, 2015. "Residential Property Price Indices For Tokyo," Macroeconomic Dynamics, Cambridge University Press, vol. 19(8), pages 1659-1714, December.
    13. Hajargasht, Gholamreza & Rao, D.S. Prasada, 2019. "Multilateral index number systems for international price comparisons: Properties, existence and uniqueness," Journal of Mathematical Economics, Elsevier, vol. 83(C), pages 36-47.
    14. Diewert, W. Erwin & Fox, Kevin J., 2017. "Substitution Bias in Multilateral Methods for CPI Construction using Scanner Data," Microeconomics.ca working papers erwin_diewert-2017-3, Vancouver School of Economics, revised 23 Mar 2017.
    15. Huffman, Wallace, 2004. "Marketizing U.S. Production in the Post-War Era: Implications for Estimating CPI Bias and Real Income from a Complete-Household-Demand System," Staff General Research Papers Archive 11987, Iowa State University, Department of Economics.
    16. Diewert, Erwin & FOX, Kevin J. & Paul Schreyer, 2017. "The Allocation and Valuation of Time," Microeconomics.ca working papers erwin_diewert-2017-5, Vancouver School of Economics, revised 04 May 2017.
    17. Tauer, Loren, 2019. "Farmer productivity by age in the United States," International Journal of Agricultural Management, Institute of Agricultural Management, vol. 8(2), August.
    18. François-Charles Wolff & Frédéric Salladarré, 2022. "A first-sale price index of seafood products," Post-Print hal-03913085, HAL.
    19. Melvyn A. Fuss & Leonard Waverman, 1985. "Productivity Growth in the Automobile Industry, 1970-1980: A Comparisonof Canada, Japan and the United States," NBER Working Papers 1735, National Bureau of Economic Research, Inc.
    20. Rotemberg, Julio J & Driscoll, John C & Poterba, James M, 1995. "Money, Output, and Prices: Evidence from a New Monetary Aggregate," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(1), pages 67-83, January.

    More about this item

    Keywords

    chain-linking; GDP; index numbers;
    All these keywords.

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ehl:lserod:124315. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: LSERO Manager (email available below). General contact details of provider: https://edirc.repec.org/data/lsepsuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.