Abstract
The motivation of this exercise is to compare the Purchasing Power Parities (PPPs) calculated using different procedures and study the sensitivity of global rankings of regions based on living standards to the PPPs used. The empirical comparison involves the GEKS, weighted CPD, GK, EWGK and the True Cost of Living Index (TCLI) based PPP estimation procedures with the Indian Rupee used as the numeraire currency. The published ICP PPPs for 2011 are used as benchmark for the non ICP PPPs obtained in this study. Evidence confirming the “Gershenkeron effect,” that affects the additive GK procedure, is provided. The results suggest that the EWGK PPPs, which are also additive, do not suffer from the extent of bias of the GK PPPs. The paper also provides evidence on the large variation in the TCLI based PPPs across expenditure quintiles originating from variation in preferences between expenditure classes. This suggests departure from the current ICP practice of providing one PPP for the entire country and points to the need to estimate PPPs by different expenditure classes. The empirical evidence points to the rich potential for the rarely used TCLI in future PPP calculations.
Acknowledgements
We are grateful to the ICP for making available the necessary price and expenditure information for the countries participating in the ICP, 2011 round. Helpful comments from the Editor, a referee, and from participants and discussants of our presentations of earlier versions in several conferences are gratefully acknowledged. The usual disclaimer applies.
Appendix
Alternative Purchasing Power Parities (PPPs) for 2011 (Numeraire: Indian Rupee).
| Region | Country | ICP | CPD | GEKS | GK | EWGK |
|---|---|---|---|---|---|---|
| Africa | Algeria | 2.062 | 1.981 | 1.932 | 1.849 | 1.918 |
| Angola | 4.996 | 3.447 | 2.973 | 2.887 | 3.120 | |
| Benin | 14.801 | 11.231 | 11.202 | 13.001 | 15.657 | |
| Botswana | 0.290 | 0.254 | 0.262 | 0.299 | 0.304 | |
| Burkina Faso | 14.552 | 12.527 | 13.841 | 14.146 | 15.521 | |
| Burundi | 31.130 | 30.518 | 30.494 | 28.251 | 40.526 | |
| Cameroon | 15.253 | 13.641 | 11.706 | 11.703 | 14.629 | |
| Cape Verde | 3.164 | 2.420 | 2.180 | 2.755 | 1.866 | |
| Central African Republic | 17.419 | 17.953 | 18.330 | 18.421 | 21.201 | |
| Chad | 16.499 | 14.829 | 15.216 | 15.733 | 16.970 | |
| Comoros | 14.360 | 12.249 | 10.748 | 7.971 | 9.864 | |
| Congo, Dem. Rep. | 35.145 | 35.070 | 39.599 | 41.121 | 45.088 | |
| Congo, Rep. | 19.711 | 19.256 | 18.889 | 19.215 | 19.092 | |
| Côte d’Ivoire | 15.691 | 15.514 | 12.713 | 11.877 | 13.340 | |
| Djibouti | 6.727 | 6.566 | 6.733 | 7.647 | 9.314 | |
| Egypt, Arab Republic | 0.115 | 0.101 | 0.109 | 0.118 | 0.108 | |
| Equatorial Guinea | 21.712 | 14.824 | 14.536 | 12.090 | 10.372 | |
| Ethiopia | 0.352 | 0.340 | 0.361 | 0.379 | 0.481 | |
| Gabon | 23.877 | 22.521 | 21.778 | 24.427 | 24.763 | |
| Gambia, The | 0.697 | 0.680 | 0.691 | 0.686 | 0.724 | |
| Ghana | 0.051 | 0.044 | 0.046 | 0.047 | 0.046 | |
| Guinea | 165.403 | 182.576 | 199.346 | 223.605 | 278.301 | |
| Guinea-Bissau | 15.827 | 17.382 | 16.995 | 15.999 | 18.574 | |
| Kenya | 2.365 | 1.959 | 1.952 | 2.032 | 2.179 | |
| Lesotho | 0.261 | 0.222 | 0.231 | 0.247 | 0.263 | |
| Liberia | 0.037 | 0.031 | 0.031 | 0.028 | 0.029 | |
| Madagascar | 46.309 | 34.217 | 34.873 | 32.572 | 35.607 | |
| Malawi | 5.195 | 4.867 | 5.376 | 5.673 | 7.415 | |
| Mali | 14.437 | 13.735 | 14.193 | 14.178 | 14.593 | |
| Mauritania | 7.395 | 6.163 | 6.409 | 6.583 | 8.464 | |
| Mauritius | 1.181 | 0.969 | 1.037 | 1.170 | 0.986 | |
| Morocco | 0.276 | 0.277 | 0.322 | 0.352 | 0.362 | |
| Mozambique | 1.051 | 0.993 | 1.011 | 1.050 | 1.114 | |
| Namibia | 0.342 | 0.270 | 0.136 | 0.077 | 0.027 | |
| Niger | 14.995 | 15.431 | 18.045 | 16.956 | 17.552 | |
| Nigeria | 5.184 | 4.464 | 4.912 | 4.958 | 5.220 | |
| Rwanda | 16.717 | 14.652 | 12.803 | 11.196 | 14.121 | |
| Senegal | 16.285 | 16.643 | 17.197 | 17.892 | 20.411 | |
| Seychelles | 0.499 | 0.490 | 0.517 | 0.600 | 0.568 | |
| Sierra Leone | 114.179 | 106.962 | 107.708 | 104.378 | 78.115 | |
| South Africa | 0.340 | 0.299 | 0.334 | 0.374 | 0.344 | |
| Sudan | 0.096 | 0.083 | 0.098 | 0.113 | 0.133 | |
| Swaziland | 0.273 | 0.189 | 0.205 | 0.247 | 0.262 | |
| São Tomé and Principe | 649.078 | 617.702 | 614.993 | 714.779 | 838.209 | |
| Tanzania | 38.494 | 35.042 | 38.535 | 35.692 | 40.833 | |
| Togo | 14.966 | 15.011 | 15.461 | 16.022 | 16.518 | |
| Tunisia | 0.045 | 0.044 | 0.045 | 0.053 | 0.047 | |
| Uganda | 61.989 | 65.103 | 59.763 | 59.932 | 71.503 | |
| Zambia | 166.554 | 156.330 | 161.138 | 185.421 | 220.414 | |
| Zimbabwe | 0.035 | 0.033 | 0.035 | 0.038 | 0.045 | |
| Asia and the Pacific | Bangladesh | 1.628 | 1.519 | 1.519 | 1.754 | 1.774 |
| Bhutan | 1.119 | 0.965 | 0.936 | 1.065 | 1.147 | |
| Brunei Darussalam | 0.058 | 0.051 | 0.044 | 0.041 | 0.036 | |
| Cambodia | 96.712 | 89.079 | 91.308 | 99.565 | 88.625 | |
| China | 0.249 | 0.232 | 0.257 | 0.300 | 0.290 | |
| Fiji | 0.080 | 0.062 | 0.059 | 0.066 | 0.059 | |
| Hong Kong SAR, China | 0.398 | 0.317 | 0.388 | 0.411 | 0.347 | |
| India | 1.000 | 1.000 | 1.000 | 1.000 | 1.000 | |
| Indonesia | 266.380 | 246.329 | 230.556 | 278.434 | 259.144 | |
| Lao PDR | 181.329 | 167.919 | 164.455 | 161.476 | 160.084 | |
| Macao SAR, China | 0.374 | 0.291 | 0.316 | 0.363 | 0.312 | |
| Malaysia | 0.106 | 0.090 | 0.057 | 0.042 | 0.040 | |
| Maldives | 0.677 | 0.529 | 0.524 | 0.669 | 0.574 | |
| Mongolia | 36.881 | 35.527 | 31.458 | 35.470 | 38.521 | |
| Myanmar | 16.380 | 14.278 | 6.164 | 3.064 | 1.112 | |
| Nepal | 1.698 | 1.065 | 0.991 | 0.921 | 0.694 | |
| Pakistan | 1.673 | 1.456 | 1.212 | 1.030 | 1.110 | |
| Philippines | 1.261 | 0.950 | 0.729 | 0.633 | 0.476 | |
| Singapore | 0.080 | 0.060 | 0.076 | 0.071 | 0.054 | |
| Sri Lanka | 2.689 | 2.645 | 2.339 | 2.466 | 2.249 | |
| Taiwan, China | 1.081 | 0.994 | 0.951 | 1.021 | 0.788 | |
| Thailand | 0.858 | 0.644 | 0.683 | 0.677 | 0.599 | |
| Vietnam | 479.060 | 394.883 | 363.134 | 380.955 | 309.393 | |
| Commonwealth and Independent States | Armenia | 10.880 | 12.298 | 11.836 | 14.401 | 15.271 |
| Azerbaijan | 0.020 | 0.023 | 0.022 | 0.023 | 0.024 | |
| Belarus | 109.735 | 123.162 | 114.905 | 134.098 | 126.719 | |
| Kazakhstan | 5.037 | 4.201 | 4.122 | 5.122 | 4.608 | |
| Kyrgyzstan | 1.037 | 0.944 | 0.901 | 1.042 | 1.129 | |
| Moldova | 0.328 | 0.325 | 0.343 | 0.377 | 0.371 | |
| Russian Federation | 1.059 | 1.048 | 0.995 | 1.187 | 1.127 | |
| Tajikistan | 0.106 | 0.109 | 0.105 | 0.103 | 0.102 | |
| Ukraine | 0.204 | 0.209 | 0.213 | 0.250 | 0.252 | |
| Eurostat-OECD | Albania | 3.400 | 3.180 | 3.132 | 3.546 | 3.738 |
| Australia | 0.107 | 0.079 | 0.079 | 0.089 | 0.080 | |
| Austria | 0.061 | 0.046 | 0.046 | 0.053 | 0.051 | |
| Belgium | 0.063 | 0.045 | 0.041 | 0.049 | 0.043 | |
| Bosnia and Herzegovina | 0.055 | 0.057 | 0.056 | 0.061 | 0.063 | |
| Bulgaria | 0.047 | 0.048 | 0.049 | 0.057 | 0.053 | |
| Canada | 0.091 | 0.070 | 0.068 | 0.076 | 0.071 | |
| Chile | 25.222 | 23.718 | 23.183 | 27.150 | 24.908 | |
| Croatia | 0.284 | 0.265 | 0.280 | 0.341 | 0.330 | |
| Cyprus | 0.050 | 0.043 | 0.046 | 0.051 | 0.051 | |
| Czech Republic | 0.960 | 0.826 | 0.820 | 0.992 | 0.973 | |
| Denmark | 0.603 | 0.450 | 0.443 | 0.538 | 0.495 | |
| Estonia | 0.038 | 0.035 | 0.032 | 0.039 | 0.039 | |
| Finland | 0.068 | 0.055 | 0.059 | 0.069 | 0.064 | |
| France | 0.061 | 0.047 | 0.049 | 0.058 | 0.052 | |
| Germany | 0.056 | 0.043 | 0.043 | 0.051 | 0.044 | |
| Greece | 0.051 | 0.044 | 0.045 | 0.053 | 0.053 | |
| Hungary | 8.651 | 7.910 | 7.863 | 9.691 | 9.177 | |
| Iceland | 9.677 | 8.722 | 9.293 | 10.621 | 10.570 | |
| Ireland | 0.067 | 0.047 | 0.045 | 0.058 | 0.052 | |
| Israel | 0.288 | 0.214 | 0.213 | 0.251 | 0.205 | |
| Italy | 0.057 | 0.048 | 0.047 | 0.058 | 0.050 | |
| Japan | 7.789 | 6.588 | 6.515 | 6.899 | 6.215 | |
| Korea, Rep. | 60.669 | 52.186 | 42.568 | 44.518 | 33.444 | |
| Latvia | 0.025 | 0.023 | 0.024 | 0.031 | 0.027 | |
| Lithuania | 0.112 | 0.114 | 0.118 | 0.140 | 0.139 | |
| Luxembourg | 0.075 | 0.047 | 0.047 | 0.056 | 0.048 | |
| Macedonia, FYR | 1.392 | 1.366 | 1.455 | 1.696 | 1.707 | |
| Malta | 0.041 | 0.039 | 0.040 | 0.047 | 0.044 | |
| Mexico | 0.549 | 0.494 | 0.503 | 0.609 | 0.573 | |
| Montenegro | 0.028 | 0.026 | 0.027 | 0.030 | 0.030 | |
| Netherlands | 0.062 | 0.044 | 0.043 | 0.052 | 0.043 | |
| New Zealand | 0.105 | 0.084 | 0.084 | 0.095 | 0.092 | |
| Norway | 0.706 | 0.614 | 0.582 | 0.695 | 0.638 | |
| Poland | 0.124 | 0.106 | 0.112 | 0.137 | 0.124 | |
| Portugal | 0.048 | 0.040 | 0.040 | 0.049 | 0.043 | |
| Romania | 0.120 | 0.115 | 0.111 | 0.135 | 0.128 | |
| Russian Federation | 1.059 | 1.048 | 0.995 | 1.187 | 1.127 | |
| Serbia | 2.802 | 2.899 | 2.827 | 3.423 | 3.295 | |
| Slovakia | 0.036 | 0.035 | 0.035 | 0.042 | 0.041 | |
| Slovenia | 0.047 | 0.041 | 0.040 | 0.047 | 0.045 | |
| Spain | 0.053 | 0.040 | 0.040 | 0.051 | 0.045 | |
| Sweden | 0.659 | 0.473 | 0.459 | 0.561 | 0.523 | |
| Switzerland | 0.114 | 0.074 | 0.069 | 0.088 | 0.076 | |
| Turkey | 0.072 | 0.071 | 0.071 | 0.081 | 0.078 | |
| United Kingdom | 0.052 | 0.039 | 0.041 | 0.050 | 0.046 | |
| United States | 0.071 | 0.055 | 0.056 | 0.066 | 0.049 | |
| Latin America | Bolivia | 0.200 | 0.178 | 0.179 | 0.135 | 0.148 |
| Brazil | 0.106 | 0.104 | 0.134 | 0.139 | 0.135 | |
| Colombia | 81.836 | 71.604 | 83.559 | 94.571 | 87.551 | |
| Costa Rica | 24.404 | 20.983 | 18.934 | 24.790 | 20.130 | |
| Dominican Republic | 1.379 | 1.245 | 1.248 | 1.247 | 1.227 | |
| Ecuador | 0.037 | 0.033 | 0.031 | 0.031 | 0.031 | |
| El Salvador | 0.036 | 0.034 | 0.032 | 0.030 | 0.029 | |
| Guatemala | 0.261 | 0.202 | 0.166 | 0.205 | 0.122 | |
| Haiti | 1.426 | 0.972 | 1.251 | 1.290 | 1.344 | |
| Honduras | 0.706 | 0.616 | 0.611 | 0.550 | 0.527 | |
| Nicaragua | 0.613 | 0.540 | 0.468 | 0.440 | 0.337 | |
| Panama | 0.037 | 0.035 | 0.038 | 0.040 | 0.040 | |
| Paraguay | 155.704 | 152.030 | 158.318 | 175.657 | 178.821 | |
| Peru | 0.104 | 0.093 | 0.097 | 0.100 | 0.096 | |
| Uruguay | 1.108 | 0.955 | 0.836 | 1.133 | 0.895 | |
| Venezuela, RB | 0.194 | 0.227 | 0.201 | 0.196 | 0.172 | |
| The Caribbean | Anguilla | 0.168 | 0.141 | 0.124 | 0.148 | 0.104 |
| Antigua and Barbuda | 0.138 | 0.116 | 0.114 | 0.107 | 0.087 | |
| Aruba | 0.106 | 0.094 | 0.106 | 0.127 | 0.121 | |
| Bahamas, The | 0.076 | 0.051 | 0.060 | 0.077 | 0.061 | |
| Barbados | 0.160 | 0.111 | 0.128 | 0.184 | 0.162 | |
| Belize | 0.079 | 0.071 | 0.054 | 0.057 | 0.047 | |
| Bermuda | 0.126 | 0.080 | 0.092 | 0.107 | 0.095 | |
| Cayman Islands | 0.075 | 0.067 | 0.075 | 0.093 | 0.093 | |
| Curaçao | 0.095 | 0.091 | 0.103 | 0.114 | 0.110 | |
| Dominica | 0.137 | 0.125 | 0.117 | 0.123 | 0.118 | |
| Grenada | 0.136 | 0.124 | 0.120 | 0.137 | 0.144 | |
| Jamaica | 4.136 | 4.377 | 4.055 | 4.581 | 4.817 | |
| Montserrat | 0.153 | 0.139 | 0.139 | 0.157 | 0.152 | |
| St. Kitts and Nevis | 0.108 | 0.097 | 0.098 | 0.149 | 0.138 | |
| St. Lucia | 0.137 | 0.143 | 0.131 | 0.138 | 0.137 | |
| St. Vincent and the Grenadines | 0.139 | 0.119 | 0.116 | 0.131 | 0.119 | |
| Suriname | 0.132 | 0.125 | 0.122 | 0.126 | 0.123 | |
| Trinidad and Tobago | 0.122 | 0.122 | 0.120 | 0.319 | 0.349 | |
| Turks and Caicos Islands | 0.299 | 0.298 | 0.300 | 0.065 | 0.051 | |
| Virgin Islands, British | 0.085 | 0.052 | 0.055 | 0.069 | 0.068 | |
| Western Asia | Bahrain | 0.015 | 0.013 | 0.011 | 0.013 | 0.011 |
| Egypt, Arab Republic | 0.115 | 0.101 | 0.109 | 0.118 | 0.108 | |
| Iraq | 35.882 | 36.465 | 36.856 | 47.536 | 51.304 | |
| Jordan | 0.021 | 0.021 | 0.022 | 0.024 | 0.026 | |
| Kuwait | 0.013 | 0.011 | 0.011 | 0.013 | 0.013 | |
| Oman | 0.014 | 0.014 | 0.015 | 0.016 | 0.016 | |
| Palestinian Territory | 0.159 | 0.130 | 0.132 | 0.132 | 0.129 | |
| Qatar | 0.204 | 0.150 | 0.171 | 0.248 | 0.251 | |
| Saudi Arabia | 0.130 | 0.120 | 0.126 | 0.145 | 0.151 | |
| Sudan | 0.096 | 0.083 | 0.098 | 0.113 | 0.133 | |
| United Arab Emirates | 0.198 | 0.147 | 0.172 | 0.227 | 0.227 | |
| Yemen | 5.319 | 5.153 | 5.372 | 5.885 | 5.741 |
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Articles in the same Issue
- Income Distribution, Factor Endowments, and Trade Revisited: The Role of Non-Tradable Goods
- Indirect Tax Reform in Developing Countries: A Consumption-Neutral Approach
- Sensitivity of Purchasing Power Parity Estimates to Estimation Procedures and their Effect on Living Standards Comparisons
- To Pay or Not to Pay? Evaluating the Belgian Law Against Vulture Funds
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Articles in the same Issue
- Income Distribution, Factor Endowments, and Trade Revisited: The Role of Non-Tradable Goods
- Indirect Tax Reform in Developing Countries: A Consumption-Neutral Approach
- Sensitivity of Purchasing Power Parity Estimates to Estimation Procedures and their Effect on Living Standards Comparisons
- To Pay or Not to Pay? Evaluating the Belgian Law Against Vulture Funds
- New Approaches to Identifying State Fragility