An interesting NBER working paper:
Trying
to Understand the PPPs in ICP2011: Why are the Results so Different?
Angus
Deaton, Bettina Aten
NBER Working Paper No.
20244
:
The 2011 round of the
International Comparison Program (ICP) has published a set of purchasing power
parities (PPPs) that are sharply different from those that were expected from
extrapolation of the 2005 round. In particular, the world in 2011 looks sharply
more equal than previously calculated, because consumption and GDP in most poor
countries were revised upward relative to the U.S. and other rich countries.
Here we attempt to find out what happened. It is first noted that the 2005
round was itself sharply different from what was then expected, and made the
world much less equal. We argue that the 2011 round is superior to the 2005
round, and that many of the changes in 2011 undo what happened in 2005. We
identify a likely source of the problem, which is the way that the regions of
the ICP were linked in 2005. We use two different methods for measuring the
size of the effect. Both suggest that the 2005 PPPs for consumption for
countries in Asia (excluding Japan), Western Asia, and Africa were overstated
by between 20 to 30 percent. If these results are correct, they call for
substantive backward revision of international comparisons, as well as
estimates of global poverty and inequality.
Earlier post on the topic: