Preferences, Purchasing Power Parity, and Inequality : Analytical Framework, Propositions, and Empirical Evidence

Majumder, Amita ; Ray, Ranjan ; Santra, Sattwik

World Bank, Washington, DC

关键词: LIVING STANDARDS;    TARIFFS;    PROFIT MAXIMIZATION;    CONSUMPTION EXPENDITURES;    FINANCIAL SERVICES;   

DOI  :  10.1596/1813-9450-7395
RP-ID  :  WPS7395

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

This paper makes analytical,methodological and empirical contributions to the literatureon purchasing power parity. Purchasing power parities arerequired in a host of cross-country welfare comparisons,such as poverty rates and gross domestic product. Thesubject has recently generated much interest in the wake ofthe release of the final results of the 2011 InternationalComparison Program. This paper introduces a preference-basedanalytical framework that departs from the conventionalBalassa-Samuelson framework in deriving empiricallyverifiable propositions on the link between purchasing powerparity and exchange rates, and between purchasing powerparity and inequality. The paper also provides analternative methodology for calculating purchasing powerparities that are benchmarked against the 2011 InternationalComparison Program purchasing power parities. As this studyshows, the alternative methodology is capable of easyimplementation on readily available data sets. Thebenchmarking exercise suggests that the 2011 InternationalComparison Program generally understates purchasing powerparity and overstates gross domestic product, and that thepurchasing power parities vary across expenditurepercentiles. The study reports regional variation in thedirection of the difference between the two purchasing powerparities. The empirical evidence is supportive of thepositive association between inequality and purchasing powerparity derived in the paper.