International Comparison in Historical Perspective: Reconstructing the 1934-36 Benchmark Purchasing Power Parity for Japan, Korea and Taiwan

This paper provides the first estimate of consumption purchasing power parity (PPP) converters for 1934-36 Japan, Korea and Taiwan by matching prices of more than 50 types of goods and services with consumption weights derived from household expenditure surveys. We find that the 1934-6 average consumer prices of Korea and Taiwan were about 0.86 and 0.84 times that of Japan respectively. Using our new benchmark estimate, we make a theoretical and empirical investigation on the possible sources of biases in existing estimates based on the exchange rate conversion and the 1990 backward projected method. Our estimate provides a vital link that allows us to conduct an overall review of structural change, ethnic income distribution and the historical trend of economic convergence or divergence for these three economies in the past century.