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Global Income Inequality and Cost-of-Living Adjustment: The Geary–Allen World Accounts

Author

Listed:
  • Almås, Ingvild

    (Dept. of Economics, Norwegian School of Economics and Business Administration)

  • Sørensen, Erik Ø.

    (Dept. of Economics, Norwegian School of Economics and Business Administration)

Abstract

Standard ways of measuring real income are known to be inconsistent with consumer preferences. We provide preference-consistent estimates of real income, based on the income-specific price indices that are consistent with nonhomothetic preferences. We find that existing measures, such as Geary, GEKS and GAIA, create systematic biases: the poorer is a country, the more its income is overestimated by these measures. Consequently, international income inequality is underestimated by the same measures.

Suggested Citation

  • Almås, Ingvild & Sørensen, Erik Ø., 2012. "Global Income Inequality and Cost-of-Living Adjustment: The Geary–Allen World Accounts," Discussion Paper Series in Economics 20/2012, Norwegian School of Economics, Department of Economics.
    • Handle: RePEc:hhs:nhheco:2012_020
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    References listed on IDEAS

    as
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    Keywords

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    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D30 - Microeconomics - - Distribution - - - General
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • F01 - International Economics - - General - - - Global Outlook

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