AEA Home
AEA

Document Request

You have requested the following article:
Cross-Country Income Levels over Time: Did the Developing World Suddenly Become Much Richer?
Robert Inklaar and D.S. Prasada Rao
American Economic Journal: Macroeconomics. Jan 2017, Vol. 9, No. 1: Pages 265-290

Cross-Country Income Levels over Time: Did the Developing World Suddenly Become Much Richer?

Robert Inklaar1 and D.S. Prasada Rao2

1University of Groningen, Faculty of Economics and Business, P.O. Box 800, 9700 AV Groningen, Netherlands (e-mail: )

2The University of Queensland, School of Economics, Colin Clark Building, St Lucia, Brisbane Qld 4072, Australia (e-mail: )

Abstract

The latest global survey on relative prices and income levels, for the year 2011, showed changes to relative income levels that were larger in lower income countries, thereby narrowing the world income distribution compared to estimates based on the previous, 2005, survey. This paper examines whether changes in measurement methodology between the 2005 and 2011 survey can explain these large differences. We construct a counterfactual set of relative prices for 2005 that harmonizes measurement, and we no longer find systematic differences across income levels, implying that international income inequality based on the 2005 survey was overstated. (JEL C82, D31, E01, E23, E31, O11)