[Maddison’s] method... yields a historical world GDP of about 210 billion US dollars on the eve of WW1. This would bring the level of international financial integration (the ratio of gross international assets to world GDP in 1913) to around 20% (Crafts, 2000; Obstfeld and Taylor, 2003a). However, a simple comparison of historical GDP reconstruction with the deflated figures indicates that the market value of the output of the four largest developing countries - Russia, India, Japan and China - was considerably lower than the deflation method yields. Clearly, the historical GDP reconstructions are not free of errors, either. Yet, if we decide to trust the accuracy of the work of economic historians, the market value of the output of low-income countries in 1914 must have been considerably lower. Adjusting developing countries’ GDP downwards, the ratio of foreign investment assets (or liabilities) to world GDP is likely to have been substantially higher than 20% - probably closer to 30%.
Schularick's implied $140 bn for current-price GWP in 1914 is the best published estimate I've seen, and offers a valuable warning of the shortcomings of projection from today's PPP-adjusted income levels. It's unfortunate that more historians don't adopt a similar approach of calculating current-price values from current-price data rather than recycling dubious estimates based on uncertain growth rates, questionable deflators and anachronistic aggregates.
No comments:
Post a Comment