Rationalising the Penn World Table: True Multilateral Indices for International Comparisons of Real Income

J. Peter Neary

No 199622, Working Papers from School of Economics, University College Dublin

Abstract: Real incomes are routinely compared internationally using methods which 'correct' for deviations from purchasing power parity. The most widely used of these is the Geary method which, though theoretically suspect, underlies the Penn World Table. This paper provides a theoretical foundation for the Geary method which I call the GAIA ('Geary-Allen International Accounts') System. I show that the Geary method is exact when preferences are non-homothetic Leontief and, more generally, gives a (possibly poor) approximation to the GAIA benchmark. An empirical application suggests that both it and other widely-used methods underestimate the degree of international inequality.

Keywords: GAIA ("Geary-Allen International Accounts") system; Geary method; Index numbers of prices and real incomes; Penn world table; PPP (Purchasing Power Parity); QUAIDS (Quadratic Almost Ideal Demand System) (search for similar items in EconPapers)
JEL-codes: C8 D1 F0 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2004-04
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

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http://hdl.handle.net/10197/6368 First version, 2004 (application/pdf)

Related works:
Journal Article: Rationalizing the Penn World Table: True Multilateral Indices for International Comparisons of Real Income (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:ucn:wpaper:199622

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