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Price indexes, inequality, and the measurement of world poverty

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  • Angus Deaton

    (Princeton University)

Abstract

I discuss the measurement of world poverty and inequality, with particular attention to the role of PPP price indexes from the International Comparison Project. Global inequality increased with the latest revision of the ICP, and this reduced the global poverty line relative to the US dollar. The recent large increase of nearly half a billion globally poor people came from an inappropriate updating of the global poverty line, not from the ICP revisions. Even so, PPP comparisons between widely different countries rest on weak theoretical and foundations. I argue for wider use of self-reports from international monitoring surveys, and for a global poverty line that is truly denominated in US dollars.

Suggested Citation

  • Angus Deaton, 2010. "Price indexes, inequality, and the measurement of world poverty," Working Papers 1207, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
    • Handle: RePEc:pri:rpdevs:deaton_price_indexes_inequality_and_the_measurement_of_world_poverty_aer.pdf
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    More about this item

    Keywords

    poverty measurement; price indexes; International Comparison Project;
    All these keywords.

    JEL classification:

    • C80 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - General
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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