3. Real GDP on the Output Side
Feenstra et al. (2009a) have recently contrasted real GDP measured on the expenditure
side of the economy, as done by the World Bank and PWT, with real GDP
measured on the output side. To develop real GDP on the output side, suppose that
the M final goods now include those used for consumption, investment and
government purchases, all of which are non-traded. In addition, suppose that there
are i = M + 1, … , M + N intermediate inputs that can be both imported and exported
(imports and exports are different varieties). This convention that all traded goods are
by definition intermediate inputs follows the ‘production approach’ to modelling
imports and exports of Diewert and Morrison (1986) and Kohli (2004), or the ‘middle
products’ approach of Sanyal and Jones (1982).
Specifically, let us denote three groups of commodities: