PWT Full Form & Meaning | What Does PWT Stand For?

The Penn World Table (PWT) is a set of national accounts developed and maintained by scholars from the Groningen Growth Development Center of Universities of California, Davis, and the University of Groningen to measure real GDP across countries and over time.

Constant updates have added countries (currently 167), years (1950–2017) and data on capital, productivity, employment, and population. The current version of the database, version 9, thus allows a comparison of GDP per capita as a measure of standard of living, productive capacity of economies, and their productivity level. Compared to other databases, such as the World Bank’s World Development Indicators, the time period covered is larger and contains more data that is useful for comparing productivity across countries and over time.

One common thing to compare GDP in countries is to use exchange rates. However, it assumes that this relative price – based on trade products – is representative of all relative prices in the economy, that is, it represents the purchasing power parity (PPP) of each currency. In contrast, PWT uses wide prices within each country for different spending categories, whether the production is traded internationally (eg, computers) or not (eg, haircuts).

These detailed prices are combined into the overall relative price level, commonly known as the country’s PPP. The detailed prices used to calculate PPP are based on data published by the World Bank as part of the International Comparison Program (ICP).

One experimental finding documented extensively by PWT is the PEN effect, which finds that real GDP is understood to a greater extent when using exchange rates rather than PPP compared to GDP in countries. The most common argument to explain this finding is the Balsa – Samuelsson effect, which argues that as countries prosper, productivity increases mostly in manufacturing and other business activities. This increases the prices of wages and thus many (non-trade) services, thereby raising the overall price level of the economy. The result is that poorer countries such as China have been shown to be more prosperous on the basis of PPP-converted real GDP than exchange-rate-converted GDP.