[lbo-talk] GDP per capita/Dougs comments

kjkhoo at softhome.net kjkhoo at softhome.net
Thu Jun 24 10:15:41 PDT 2004


At 9:06 pm +0500 24/6/04, uvj at vsnl.com wrote:
>Doug Henwood wrote;
>
>> Chris Doss wrote:
>>
>> >I don't know about Chinese, but Russians live considerably better
>> >than one would think they do looking at the official stats, as I
>> >have stated before, which makes me leery of them. (Shadow economy,
>> >fake taxes, lots of stuff almost free, no rent, free summer house,
>> >stuff like that.)
>>
>> The WB has Russia at 23% of US per capita GDP on a PPP basis, or
>> around $8,200/yr - but on a market exchange basis, about 10%.
>
>One can buy a loaf of good quality bread in my city (Pop. 15 mn) for
>20 cents. (Things cost much less small towns and villages.) How much
>it would cost in NY?

But stuff such as the price of staples in different localities is among the things that PPP can and does factor in. It can't, by definition, take account of the "grey/black" economy which might push the PPP down through its impact on prices -- prices which don't quite make sense, looking only at official GDP.

Whatever, surely there isn't one single measure for inter-country comparisons. PPP probably works well enough, give or take, for actual in-country living standards in some dimensions, better for some segments of the population than others. In an earlier post, Doug suggested that PPP might have the "fortunate side-effect" of making the poor seem less poor. But it might actually have the side-effect of making the middle income in the non-US/EU seem richer -- in so far as the basket used to estimate PPP might reflect a greater share of in-country production (or inputs for final consumption goods) than would be true of the consumption basket of the middle income. An instance would be the greater share of wheat-based products (inputs purchased at exchange rates) in the consumption of the middle income in tropical countries.

Exchange rate comparisons would be better if the idea is to get at the structure of global inequality; and to the degree that we come to have a single global market for goods and services, exchange rate comparisons do an increasingly better job.

kj khoo



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