Constructing Bounds on Per Capita Income Differentials across Countries |
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Authors: | Robert J. Hill |
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Affiliation: | University of New South Wales, Sydney, NSW 2052, Australia |
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Abstract: | The results of purchasing power parity (PPP)-based comparisons of income across countries can be quite sensitive to the choice of index number formula. Tighter bounds on per capita income differentials can be constructed either by assuming homothetic preferences, or by estimating a demand system. Both approaches are used to construct bounds on per capita income differentials across the OECD countries. The paper concludes by discussing the strengths and weaknesses of each approach. JEL Classification C 43; F 31; O 47 |
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Keywords: | International comparisons cost of living index exchange rate linear expenditure system |
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