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Measuring Global Poverty: Why PPP Methods Matter

Author

Listed:
  • 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.

Suggested Citation

  • Robert Ackland & Steve Dowrick & Benoit Freyens, 2013. "Measuring Global Poverty: Why PPP Methods Matter," The Review of Economics and Statistics, MIT Press, vol. 95(3), pages 813-824, July.
  • Handle: RePEc:tpr:restat:v:95:y:2013:i:3:p:813-824
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    Keywords

    global poverty;

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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