Discussion Paper Series in Economics, Department of Economics, Norwegian School of Economics (NHH)
Global Income Inequality and Cost-of-Living Adjustment: The Geary–Allen World Accounts.
() and Erik Ø. Sørensen
Abstract: Standard ways of measuring real income are known to be
inconsistent with consumer preferences. We provide preference-consistent
estimates of real income, based on the income-specific price indices that
are consistent with nonhomothetic preferences. We find that existing
measures, such as Geary, GEKS and GAIA, create systematic biases: the
poorer is a country, the more its income is overestimated by these
measures. Consequently, international income inequality is underestimated
by the same measures.
Keywords: Income Inequality; (follow links to similar papers)
JEL-Codes: D01; D30; E01; F01; (follow links to similar papers)
33 pages, November 1, 2012
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