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True Multilateral Indexes for International Comparisons of Real Income: Theory and Empirics

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  • Neary, J Peter

Abstract

I introduce a utility-consistent benchmark for international comparisons of real income, the GAIA (‘Geary-Allen International Accounts’) System. It coincides with the Geary method (which underlies the Penn World Table) when preferences are Leontief and with the EKS method (favoured by OECD) when preferences are homogeneous quadratic. The Geary method seems preferable since it gives a (possibly poor) approximation to a consistent set of international comparisons, whereas the EKS method gives a good approximation to an inconsistent set. An illustrative empirical application, using estimates of a QUAIDS demand system, suggests that both methods impose excessive ‘convergence’ on the data.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2590.

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Date of creation: Oct 2000
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Handle: RePEc:cpr:ceprdp:2590

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Keywords: Exchange Rates; GAIA System; Geary Method; Index Numbers of Prices And Real Incomes; International Comparisons Of Real Incomes; Penn World Table; Purchasing Power Parities; QUAIDS (Quadratic Almost Ideal Demand System);

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Cited by:
  1. Ciccone, Antonio & Jarociński, Marek, 2008. "Determinants of economic growth: will data tell?," Working Paper Series 0852, European Central Bank.
  2. Robert J. Hill & Daniel Melser, 2007. "Comparing House Prices Across Regions and Time: An Hedonic Approach," Discussion Papers 2007-33, School of Economics, The University of New South Wales.
  3. Robert J. Hill & T. Peter Hill, 2007. "Regionalization and its Implications for Price Index Construction: The Case of the International Comparisons Program," Discussion Papers 2007-28, School of Economics, The University of New South Wales.

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