Cross-Country Income Levels over Time: Did the Developing World Suddenly Become Much Richer?

Abstract

The latest global survey on relative prices and income levels showed revisions to income levels that were larger in lower-income countries, thereby shifting the world income distribution. The aim of this paper is to establish whether changes in measurement methodology and price sampling methods between the latest price survey for 2011 and the previous survey for 2005 can explain these large differences. We construct a counterfactual set of relative prices for 2005 that harmonizes measurement and we find that the systematic differences in income levels are substantially reduced or even eliminated, implying that international income inequality had been overstated.

A global count of the extreme poor in 2012: data issues, methodology and initial results

“…Deaton and Aten argue that the cross-region ring index is the key source of error in the 2005 PPP data, resulting in an overestimation of the relative price levels in Africa, Asia and Western Asia by 20 to 30 %. Along similar lines, Inklaar and Rao (2014) re-construct the 2005 PPP index following a similar methodology to that used for the 2011 PPP index and find that this methodological difference in the construction of the PPP factors explains a significant portion of the difference in relative price levels.…”

Continuous national Gross Domestic Product (GDP) time series for 195 countries: past observations (1850–2005) harmonized with future projections according to the Shared Socio-economic Pathways (2006–2100)

“…Moreover, PWT8.1 replaces the strongly criticized original PPPs for 2005, see e.g. [Deaton and Heston, 2010], by a modified version, see [Inklaar and Rao, 2017] for details. Missing countries in PWT8.1 are taken from PWT9.0 after rescaling from 2011 PPP $ to 2005 PPP $ 20 dollars, see discussion below.…”

Three Essays on Growth Econometrics

“…I sample both m 1 and m 2 uniformly over the interval [0.5, 1.5]. This decision is informed by the work of Deaton (2005) showing that the ratio of income estimates from consumptions survey to income estimates from national accounts range between [0.6, 0.8], and also the work of Inklaar and Rao (2015) which finds that the percentage increase in income levels between ICP 2011 and ICP 2005 was around 25%. I choose a range that envelopes these values.…”

“…In the top row of Table ( (1) greater weight is assigned to WDI 2015 by both MVAR and MSPE because the ICP 2011 data is more accurate; (2) there is a large disparity between MVAR and MSPE weights because the systematic biases of ICP 2005 discussed by Inklaar and Rao (2015) imply that m 1 = m 2 .…”