A Note on Estimating Income Inequality across countries using PPP Exchange Rates*

Feb 1st 2018, Jayati Ghosh

The use of exchange rates based on Purchasing Power Parities to compare income across countries and over time has become standard practise. But there are reasons to believe this could lead to excessively inflated incomes for poor countries and in some cases also inflate the extent of real changes over time. Estimates of gross domestic product growth in Chinese and Indian economies in recent years provide examples of this.

This article was originally posted in the Economic and Labour Relations Review on January 30, 2018.

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