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Dumagan, Jesus C.
Year of Publication: 
Series/Report no.: 
PIDS Discussion Paper Series 2011-08
In current practice in all countries, subaggregate chained volume measures (CVMs) are not weighted and, thus, not additive. However, weights are necessary because without them, nonadditivity permits the nonsensical result that a subaggregate CVM could exceed the aggregate CVM. This paper derives weights to make the sum of weighted subaggregates equal the aggregate (i.e., additivity) and avoid this nonsensical result. The weights are ratios of subaggregate to aggregate chained price deflators that exceed, equal, or fall below 1 depending on relative prices. CVMs in current practice are additive only in the special case of constant relative prices when all weights equal 1. Without weights, they are not additive when relative prices change and, in this case, empirical results show that nonadditivity could significantly distort the sectoral composition of GDP.
chained volume measure
GDP in chained prices
additivity weight
chained index
consistency in aggregation
Document Type: 
Working Paper

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