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Understanding PPPs and PPP-Based National Accounts

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  • Angus Deaton
  • Alan Heston

Abstract

We provide an overview of the theory and practice of constructing PPPs. We focus on four practical areas: how to handle international differences in quality; the treatment of urban and rural areas of large countries; how to estimate prices for government services, health, and education; and the effects of the regional structure of the latest International Comparison Program for 2005. We discuss revisions of the Penn World Table, and their effects on econometric analysis, and include health warnings. Some international comparisons are close to impossible, even in theory, and in others, the practical difficulties make comparison exceedingly hazardous. (JEL C43, E01, E31, O57).

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Article provided by American Economic Association in its journal American Economic Journal: Macroeconomics.

Volume (Year): 2 (2010)
Issue (Month): 4 (October)
Pages: 1-35

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Handle: RePEc:aea:aejmac:v:2:y:2010:i:4:p:1-35
Note: DOI: 10.1257/mac.2.4.1
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Find related papers by JEL classification:
  • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
  • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
  • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
  • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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  1. What does Real GDP Measure?
    by dvollrath in The Growth Economics Blog on 2014-08-29 18:32:39
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