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Measuring Global Poverty: Why PPP Methods Matter

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Author Info

  • Robert Ackland

    (Australian Demographic and Social Research Institute, Australian National University)

  • Steve Dowrick

    (School of Economics, Australian National University)

  • Benoit Freyens

    (Faculty of Business, Government, and Law, University of Canberra and Centre of Law and Economics, Australian National University)

Abstract

We present theory and evidence to suggest that, in the context of analyzing global poverty, the EKS approach to estimating purchasing power parities yields more appropriate international comparison of real incomes than the Geary-Khamis approach. Our analysis of the 1996 and 2005 International Comparison Project data confirms that the Geary-Khamis approach substantially overstates the relative incomes of the world's poorest nations, and this leads to misleading comparisons of poverty across regions and over time. The EKS index of real income is much closer to being a true index of economic welfare and is therefore preferred for assessment of global poverty. © 2013 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/REST_a_00294
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Bibliographic Info

Article provided by MIT Press in its journal Review of Economics and Statistics.

Volume (Year): 95 (2013)
Issue (Month): 3 (July)
Pages: 813-824

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Handle: RePEc:tpr:restat:v:95:y:2013:i:3:p:813-824

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Web page: http://mitpress.mit.edu/journals/

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Related research

Keywords: global poverty;

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Cited by:
  1. Martin Ravallion & Shaohua Chen & Prem Sangraula, 2009. "Dollar a Day Revisited," World Bank Economic Review, World Bank Group, vol. 23(2), pages 163-184, June.
  2. Ferreira, Francisco H.G. & Ravallion, Martin, 2008. "Global poverty and inequality : a review of the evidence," Policy Research Working Paper Series 4623, The World Bank.
  3. Lakner, Christoph & Milanovic, Branko, 2013. "Global income distribution : from the fall of the Berlin Wall to the great recession," Policy Research Working Paper Series 6719, The World Bank.
  4. Chen, Shaohua & Ravallion, Martin, 2008. "The developing world is poorer than we thought, but no less successful in the fight against poverty," Policy Research Working Paper Series 4703, The World Bank.
  5. Ravallion, Martin & Chen, Shaohua & Sangraula, Prem, 2007. "New evidence on the urbanization of global poverty," Policy Research Working Paper Series 4199, The World Bank.
  6. Zaytsev, Alexander, 2014. "Душевой Ввп И Производительность Труда В России: Было Ли Догоняющее Развитие?
    [Russia`s per capita and per hour GDP dynamics: have w
    ," MPRA Paper 56312, University Library of Munich, Germany.
  7. Ravallion, Martin, 2009. "A comparative perspective on poverty reduction in Brazil, China and India," Policy Research Working Paper Series 5080, The World Bank.
  8. Ravallion, Martin & Chen, Shaohua, 2009. "Weakly relative poverty," Policy Research Working Paper Series 4844, The World Bank.
  9. David Warner & Prasada Rao & William E. Griffiths & Duangkamon Chotikapanich, 2011. "Global Inequality: Levels and Trends, 1993-2005," Discussion Papers Series 436, School of Economics, University of Queensland, Australia.
  10. Sudhir Anand & Paul Segal, 2008. "What Do We Know about Global Income Inequality?," Journal of Economic Literature, American Economic Association, vol. 46(1), pages 57-94, March.

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