[go: up one dir, main page]
More Web Proxy on the site http://driver.im/
IDEAS home Printed from https://ideas.repec.org/p/zbw/esprep/218972.html
   My bibliography  Save this paper

Why PPP exchange rates should be avoided in global poverty estimates

Author

Listed:
  • Moatsos, Michail
Abstract
Purchasing Power Parity (PPP) exchange rates work appreciatively for comparing economies across the globe, instead of the standard market exchange rates. PPPs come closer to represent the relative size of the economies because they correct for non-tradeables that are relatively cheaper in less developed countries. However, those rates are constructed for comparing countries, or their households, in sum. Thereby when they are used to compare sub-groups, e.g. the poor in each country, their methodological foundations are stretched beyond their specifications. This paper highlights the often neglected issues that are raised from this standard practice in global poverty measurement.

Suggested Citation

  • Moatsos, Michail, 2020. "Why PPP exchange rates should be avoided in global poverty estimates," EconStor Preprints 218972, ZBW - Leibniz Information Centre for Economics.
    • Handle: RePEc:zbw:esprep:218972
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/218972/1/StopPPPUse.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. ,, 2001. "Problems And Solutions," Econometric Theory, Cambridge University Press, vol. 17(6), pages 1157-1160, December.
    2. Ahluwalia, Montek S. & Carter, Nicholas G. & Chenery, Hollis B., 1979. "Growth and poverty in developing countries," Journal of Development Economics, Elsevier, vol. 6(3), pages 299-341, August.
    3. Robert C. Feenstra & Robert Inklaar & Marcel P. Timmer, 2015. "The Next Generation of the Penn World Table," American Economic Review, American Economic Association, vol. 105(10), pages 3150-3182, October.
    4. Stephan Klasen & Tatyana Krivobokova & Friederike Greb & Rahul Lahoti & Syamsul Hidayat Pasaribu & Manuel Wiesenfarth, 2016. "International income poverty measurement: which way now?," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 14(2), pages 199-225, June.
    5. Shaohua Chen & Martin Ravallion, 2010. "The Developing World is Poorer than We Thought, But No Less Successful in the Fight Against Poverty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(4), pages 1577-1625.
    6. ,, 2001. "Problems And Solutions," Econometric Theory, Cambridge University Press, vol. 17(5), pages 1025-1031, October.
    7. Angus Deaton & Olivier Dupriez, 2011. "Spatial price differences within large countries," Working Papers 1321, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
    8. Robert C. Allen, 2017. "Absolute Poverty: When Necessity Displaces Desire," American Economic Review, American Economic Association, vol. 107(12), pages 3690-3721, December.
    9. Angus Deaton, 2010. "Price Indexes, Inequality, and the Measurement of World Poverty," American Economic Review, American Economic Association, vol. 100(1), pages 5-34, March.
    10. repec:pri:rpdevs:presidential%20address%2017january%202010%20all.pdf is not listed on IDEAS
    11. Robert C. Allen, 2017. "Absolute Poverty: When Necessity Displaces Desire REVISED," Working Papers 20170005, New York University Abu Dhabi, Department of Social Science, revised Jun 2017.
    12. repec:pri:rpdevs:spatial_price_differences_in_large_countries-_10-jul_2011_complete is not listed on IDEAS
    13. Moatsos Michail, 2016. "Global Absolute Poverty: Behind the Veil of Dollars," Journal of Globalization and Development, De Gruyter, vol. 7(2), pages 1-28, December.
    14. Angus Deaton & Alan Heston, 2010. "Understanding PPPs and PPP-Based National Accounts," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(4), pages 1-35, October.
    15. Ravallion, Martin & Datt, Gaurav & van de Walle, Dominique & Chan, Elaine, 1991. "Quantifying the magnitude and severity of absolute poverty in the developing world in the mid-1980s," Policy Research Working Paper Series 587, The World Bank.
    16. Robert Ackland & Steve Dowrick & Benoit Freyens, 2013. "Measuring Global Poverty: Why PPP Methods Matter," The Review of Economics and Statistics, MIT Press, vol. 95(3), pages 813-824, July.
    17. repec:pri:rpdevs:deaton_price_indexes_inequality_and_the_measurement_of_world_poverty_aer. is not listed on IDEAS
    18. Ravallion, Martin, 1994. "Poverty rankings using noisy data on living standards," Economics Letters, Elsevier, vol. 45(4), pages 481-485, August.
    19. Martin Ravallion & Gaurav Datt & Dominique van de Walle, 1991. "Quantifying Absolute Poverty In The Developing World," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 37(4), pages 345-361, December.
    20. Robert Allen, 2013. "Poverty Lines in History, Theory, and Current International Practice," Economics Series Working Papers 685, University of Oxford, Department of Economics.
    21. repec:bla:revinw:v:37:y:1991:i:4:p:345-61 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Robert C. Allen, 2017. "Absolute Poverty: When Necessity Displaces Desire," American Economic Review, American Economic Association, vol. 107(12), pages 3690-3721, December.
    2. Moatsos, Michail, 2020. "Global Absolute Poverty: The Evolution of its Measurement," EconStor Preprints 216642, ZBW - Leibniz Information Centre for Economics.
    3. Moatsos, Michail & Lazopoulos, Achillefs, 2021. "Global poverty: A first estimation of its uncertainty," World Development Perspectives, Elsevier, vol. 22(C).
    4. Moatsos Michail, 2016. "Global Absolute Poverty: Behind the Veil of Dollars," Journal of Globalization and Development, De Gruyter, vol. 7(2), pages 1-28, December.
    5. Robert C. Allen, 2017. "Absolute Poverty: When Necessity Displaces Desire REVISED," Working Papers 20170005, New York University Abu Dhabi, Department of Social Science, revised Jun 2017.
    6. Moatsos, Michail, 2020. "The devil in the details: The core disadvantage of the International Poverty Line," EconStor Preprints 218971, ZBW - Leibniz Information Centre for Economics.
    7. Michail Moatsos & Achillefs Lazopoulos, 2024. "Stress-testing the international poverty line and the official global poverty statistics," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-12, December.
    8. Dhongde, Shatakshee & Minoiu, Camelia, 2013. "Global Poverty Estimates: A Sensitivity Analysis," World Development, Elsevier, vol. 44(C), pages 1-13.
    9. Michail Moatsos, 2021. "Long run trails of poverty, 1925–2010," Empirical Economics, Springer, vol. 61(5), pages 2797-2825, November.
    10. Martin Ravallion, 2016. "Toward better global poverty measures," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 14(2), pages 227-248, June.
    11. Moatsos, Michail, 2022. "Long-Run Trends and Confidence Intervals in the Cost of Basic Needs and Global Poverty: A ballpark approach," MPRA Paper 113035, University Library of Munich, Germany.
    12. Sédi-Anne Boukaka & Giulia Mancini & Giovanni Vecchi, 2021. "Poverty and inequality in Francophone Africa, 1960s–2010s," Economic History of Developing Regions, Taylor & Francis Journals, vol. 36(1), pages 1-29, January.
    13. Francisco H. G. Ferreira & Shaohua Chen & Andrew Dabalen & Yuri Dikhanov & Nada Hamadeh & Dean Jolliffe & Ambar Narayan & Espen Beer Prydz & Ana Revenga & Prem Sangraula & Umar Serajuddin & Nobuo Yosh, 2016. "A global count of the extreme poor in 2012: data issues, methodology and initial results," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 14(2), pages 141-172, June.
    14. Facundo Alvaredo & Leonardo Gasparini, 2013. "Recent Trends in Inequality and Poverty in Developing Countries," CEDLAS, Working Papers 0151, CEDLAS, Universidad Nacional de La Plata.
    15. Balint Menyhert, 2024. "Absolute Poverty Measurement with Minimum Food Needs: A New Inverse Method for Advanced Economies," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 174(1), pages 313-351, August.
    16. Hanjie Wang & Qiran Zhao & Yunli Bai & Linxiu Zhang & Xiaohua Yu, 2020. "Poverty and Subjective Poverty in Rural China," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 150(1), pages 219-242, July.
    17. Maxim Pinkovskiy & Xavier Sala-i-Martin, 2015. "Lights, Camera,... Income! Estimating Poverty Using National Accounts, Survey Means and Lights," LIS Working papers 645, LIS Cross-National Data Center in Luxembourg.
    18. Andrea Brandolini & John Micklewright, 2023. "Measuring global poverty," Chapters, in: Jacques Silber (ed.), Research Handbook on Measuring Poverty and Deprivation, chapter 6, pages 60-69, Edward Elgar Publishing.
    19. Maxim L. Pinkovskiy & Xavier X. Sala-i-Martin, 2014. "Lights, camera,...income! Estimating poverty using national accounts, survey means, and lights," Staff Reports 669, Federal Reserve Bank of New York.
    20. Meysonnat, Aline & Muysken, Joan & Zon, Adriaan van, 2015. "Poverty traps: the neglected role of vitality," MERIT Working Papers 2015-052, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).

    More about this item

    Keywords

    Global Poverty; Absolute Poverty; PPP; Purchasing Power Parity; Poverty Measurement; Global Poverty Measurement;
    All these keywords.

    JEL classification:

    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:esprep:218972. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/zbwkide.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.