Jacob Assa and I recently published our work on the implications of changes in measurement standards of GDP for global convergence debates – and the political economy implications of recent reforms. In short, we find that how we measure GDP is largely determined by Western institutions and the economic structures of Western economies, thus underestimating the growth of non-Western economies that have different economic structures. The recent increase in the proportion of imputations in GDP has also had the effect of boosting the GDP of the West relative to the rest of the world, which is the inspiration for the paper title: Imputing Away the Ladder.
What are the implications of changes in measurement standards of GDP for global convergence debates? What are the political economy implications? To answer the former question, we examine the changes in national accounting standards from the early 1990s. Revisions to the System of National Accounts (SNA) – the international standard for constructing GDP – include several major changes to how production is measured, including the reclassification of financial intermediation services, R&D, and weapons systems as productive activities – all areas in which countries in the West has had an advantage in recent decades. In addition, there has been an increase in the proportion of imputations in the 1993 and 2008 revisions, which privileges the economic structures of the West. Overall, we find that these changes have had the effect of boosting the GDP of the West relative to the rest of the world and thus to an underestimation of global convergence compared to previous measures of GDP. To answer the second question, the paper unpacks the political economy implications of national accounting standards favouring Western economies along several axes, including the impacts on voting shares in international institutions, domestic policy incentives and epistemological debates about sustainable development.
Read the full paper here. If you don’t have access to New Political Economy, you can request a PDF from Jacob or me through ResearchGate.