Highlights from NBER WP 15455, which I flagged last week:

How fast did Equatorial Guinea grow over the two and a half decades beginning in 1975? The natural place to turn to answer such a question is data from the Penn World Table (PWT), which is the most widely used source for cross-country comparisons for the level and growth rate of GDP. According to its latest available version (PWT 6.2) Equatorial Guinea is the second-fastest growing country among 40 African countries. However, according to its previous version (PWT 6.1), which was released four years before, Equatorial Guinea was the slowest growing country. Indeed, as table 1 shows, if one were to compile the list of the 10 fastest and slowest growing countries in Africa between 1975 and 1999, PWT 6.1 and PWT 6.2 would produce almost disjoint lists…

The variability of growth data has implications for the cross-country growth literature. Results based on annual data prove to be less robust across versions of the PWT than are results based on 10-year averages and/or levels of GDP. And results are sensitive to sample, especially the inclusion of small countries…

Plotting the data suggests that data quality might matter for revisions. The left-hand panel in figure 6 shows differences in 29-year annual average growth rates (1970—1999) for countries with data quality grades of A or B. The right-hand panel shows the same for countries with grades of C or D. All the major variation across versions of the table occurs in the countries with lower grades…

We have examined many of the leading papers in the growth literature based on PWT 5.6 or 6.1. In each case, we attempted to run exactly the same specifications and samples, but using version 6.2 of the table instead. This approach cannot prove that a particular set of results is right or wrong, but it may illustrate patterns in terms of what kind of results are more or less robust…

In all, we tested the robustness of 13 papers in the growth literature. Note that we did not check all specifications in all papers. Rather we concentrated on what appeared to us–or to others citing the work–as the “main” results. The lower part of Appendix table 2 lists nine papers for which we found basically no or small changes in results. In addition, there were more substantial changes for four papers: Ramey and Ramey (1995), Jones and Olken (2005), Hausmann, Pritchett, and Rodrik (2005), and Aghion, Howitt, and Mayer-Foulkes (2005).

This abstract caught my eye, though I haven’t looked at the paper:

This paper sheds light on two problems in the Penn World Table (PWT) GDP estimates. First, we show that these estimates vary substantially across different versions of the PWT despite being derived from very similar underlying data and using almost identical methodologies; that this variability is systematic; and that it is intrinsic to the methodology deployed by the PWT to estimate growth rates. Moreover, this variability matters for the cross-country growth literature. While growth studies that use low frequency data remain robust to data revisions, studies that use annual data are less robust. Second, the PWT methodology leads to GDP estimates that are not valued at purchasing power parity (PPP) prices. This is surprising because the raison d’être of the PWT is to adjust national estimates of GDP by valuing output at common international (purchasing power parity [PPP]) prices so that the resulting PPP-adjusted estimates of GDP are comparable across countries. We propose an approach to address these two problems of variability and valuation.