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GERSCHENKRON EFFECT

Statistics Directorate    
Definition:
Applicable only to aggregation methods that use either a reference price structure – that is, each country’s quantities are valued by a uniform set of prices - or a reference volume structure – that is, each country’s prices are used to value a uniform set of quantities - to compare countries.

Context:
For methods employing a reference price structure, a country’s share of total GDP - that is, the total for the group of countries being compared - will rise as the reference price structure becomes less characteristic of its own price structure. For methods employing a reference volume structure, a country’s share of total GDP will fall as the reference volume structure becomes less characteristic of its own volume structure. The Gerschenkron effect arises because of the negative correlation between prices and volumes.

Source Publication:
Eurostat, OECD, 2007, Eurostat-OECD Methodological Manual on Purchasing Power Parities, OECD, Paris – Annex VII, Glossary of terms and abbreviations.

Statistical Theme: Prices and purchasing power partities

Created on Thursday, July 12, 2007