where Xj and Mj are the
nominal values of exports and imports. Note that qij and PPPe
j are defined as in (2)
and (3) but now computed over all final goods, that is, for consumption, investment
and government expenditures. We use the superscript e on real GDPe to stress that this
is an expenditure-based measure, as the prices used to compute PPPe
j are those for
final goods only. As discussed by Feenstra et al. (2009a), this measure of real GDP is
intended to reflect the living standards or consumption possibilities of an economy. In the
next section, we will discuss an alternative output-based measure, real GDPo
, that
reflects the production possibilities of an economy.
Feenstra et al. (2013) compute (13) for all countries included in the 2005 ICP, as will
be reported in PWT 8.0. From preliminary results for China, without making any
adjustment to the ICP prices, they find that real GDPe per capita is $4,749 in 2005, or
about 15% larger than the estimate of $4,088 from the World Bank (2008a). The
difference between these two estimates can only come from one of two sources: