Arbeitspapier

International income inequality: Measuring PPP bias by estimating Engel curves for food

Purchasing power adjusted incomes applied in cross-country comparisons are measured with bias. In this paper, we estimate the purchasing power parity (PPP) bias in Penn World Table incomes and provide corrected real incomes. The bias is substantial and systematic: the poorer is a country, the more its income tends to be overestimated. Consequently, international income inequality is substantially underestimated. Our methodological contribution is to exploit the analogies between PPP bias and the bias in consumer price index (CPI) numbers. The PPP bias, and consequently real incomes, is measured by estimating Engel curves for food, which is an established method of measuring CPI bias.

Language
Englisch

Bibliographic citation
Series: LIS Working Paper Series ; No. 473

Classification
Wirtschaft
Price Level; Inflation; Deflation
Global Outlook
Subject
Kaufkraftparität
Einkommensverteilung
International
Verbraucherpreisindex
Mikroökonomische Konsumfunktion
Nahrungsmittelkonsum
Welt

Event
Geistige Schöpfung
(who)
Almås, Ingvild
Event
Veröffentlichung
(who)
Luxembourg Income Study (LIS)
(where)
Luxembourg
(when)
2008

Handle
Last update
10.03.2025, 11:44 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Almås, Ingvild
  • Luxembourg Income Study (LIS)

Time of origin

  • 2008

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