Is Newer Better ? Penn World

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 despitebeing derived from very similar underlying data and using almost identical methodologies; thatthis variability is systematic; and that it is intrinsic to the methodology deployed by the PWT toestimate 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 thatuse annual data are less robust. Second, the PWT methodology leads to GDP estimates that arenot valued at purchasing power parity (PPP) prices. This is surprising because the raison d’êtreof 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 GDPare comparable across countries. We propose an approach to address these two problems ofvariability and valuation. JEL Classification: O11, O40, O47.