Did the developing world suddenly become much richer?
|Date:||14 March 2016|
The answer is 'no', as shown in a paper by Robert Inklaar and Prasada Rao (University of Queensland) that has just been accepted by the American Economic Journal: Macroeconomics, which ranks in the top ten of economics journals.
The article, whose full title is “Cross-country income levels over time: did the developing world suddenly become much richer?” analyses the differences between two subsequent global price comparisons of the International Comparison Program, in 2005 and 2011. The results for the 2011 comparison seemed to suggest that lower-income countries has much higher income levels relative to high-income countries than estimated based on the 2005 price comparison. However, Inklaar and Rao show that the 2005 price comparison had been biased and international income differences based on that comparisons had been overestimated. The bias-corrected results for 2005 are, on average, consistent with the 2011 results, which is encouraging given the large body of literature relying on the consistence over time of cross-country income comparisons.
A version of this paper can be downloaded as a GGDC Research Memorandum.