Amendments To China's Gdp Based On Hedonic Price Theory

This paper explores the use of time series data to isolate quality change in the Chinese economy using a hedonic procedure. We argue that the traditional approach to hedonic estimation based upon panel data sets of different brands in a given product area is extremely resource intensive. This paper adopts a new approach to see whether more traditional measures of technical change, such as Inventions, can be used to separate pure inflation from quality change. If this is possible,it offers a much simpler route to estimate the role of quality change in economic growth and performance. In practice, we extend the analysis not only to include Inventions, but other forms of intellectual property that might reflect technology and attribute changes, such as designs and utility models .The principal aim of this paper is to demonstrate that it is possible to develop robust models to explain changes in the producer price index in China, which can then be used to reexamine Chinese growth performance over the period from about 1985. If the official Chinese statistical department has fully accounted for quality change in the price indices (i.e. produced fully quality-constant price deflators), then the official estimates of growth will be correct.However, we provide strong evidence that this is not the case. Changes in quality, proxied by the IP variables, are important determinants of prices in China over the period 1985 to 2006 as a whole.Indeed,we provide evidence that the true rate of growth of the Chinese economy, taking into account the rate of quality change, is significantly higher than that suggested in official statistics.