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Global Income Inequality and Cost-of-Living Adjustment: The Geary–Allen World Accounts

Ingvild Almås () and Erik Sørensen ()

No 20/2012, Discussion Paper Series in Economics from Norwegian School of Economics, Department of Economics

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 (search for similar items in EconPapers)
JEL-codes: D01 D30 E01 F01 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2012-11-01
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