The emperor has no clothes: Improving deflators for Canadian GNP 1870-1900

I have a new working paper, co-authored with Michael Hinton, on improving the measurements of Canadian GNP between 1870 and 1900. Some years ago, when he was a doctoral student, Michael found a series of consistent price measurements for cotton in Canada. Back then, Malcolm Urquhart had not yet published his seminal estimates of Canadian GNP from 1870 to 1926. However, in the intervening years, Urquhart had published those estimates but the deflators he used did not include a clothing component between 1870 and 1900. This was, according to Urquhart himself, an important shortcoming of his work. As the price of clothing fell more rapidly than all other goods during the period and especially during the 1870s, the absence of a clothing component to deflators would bias estimates of incomes in real terms. Michael and myself teamed up to solve this shortcoming. The paper can be consulted here on SSRN and the abstract is below:

A new consumer price index for Canada, 1870-1900 is constructed, which includes prices for clothing and household furnishings which were missing in previous Canadian price indexes for this period. This is important because these neglected components accounted for 10 to 15 per cent of consumers’ expenditures; and the retail price of cotton goods, the most important textile product used for clothing and household furnishings at this time, even in Canada, whose winters are harsh, fell by 49.6 percent between 1870 and 1900 (much faster than other components of the price level). This has ramifications for both the level and trend of Canadian GDP which shows the country to be richer and to have grown substantially faster than generally believed.


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