The Rising Wealth of Nations

The new Penn World Table, Version 6.2, comparing standards of living across countries, has just been released. The latest figures are for 2004, and, because of data lags, not all countries are included. Yet these numbers are valuable because they are of exceptional quality and they correct systematically for relative price differences across countries, which sometimes leads to surprising results.

Among the 82 countries for which 2004 data are now available, there has been really good news: real per capita GDP has risen by an average of 18.9% between 2000 and 2004, or 4.4% per year. People generally are a lot better off than they were just a few years ago. At this rate, real per capita GDP will double every 16 years.

Many people who could not afford a car in 2000 now have one, and people who could afford only one car in 2000 now have two. People who could not afford to send their children to a good school or college now can. And so it is with many different goods and services that people consume.

One surprise is that there has been relatively little change in the ranking of countries by real per capita GDP since 2000. Despite all the talk about the Chinese economic miracle, China’s ranking has risen only slightly, from 61st out of 82 countries in 2000 to 60th in 2004 – even though per capita real GDP grew by 44% between 2000 and 2004, or 9.6% a year, the highest of the major countries.