Consistent comparisons of real incomes across time and space

Feenstra, Robert C., Ma, Hong and Rao, D.S. Prasada (2009) Consistent comparisons of real incomes across time and space. Macroeconomic Dynamics, 13 S2: 169-193. doi:10.1017/S1365100509090221


Author Feenstra, Robert C.
Ma, Hong
Rao, D.S. Prasada
Title Consistent comparisons of real incomes across time and space
Journal name Macroeconomic Dynamics   Check publisher's open access policy
ISSN 1365-1005
Publication date 2009-09-01
Year available 2009
Sub-type Article (original research)
DOI 10.1017/S1365100509090221
Volume 13
Issue S2
Start page 169
End page 193
Total pages 25
Editor Barnet, William A.
W. Erwin Diewert
Iwata, Shigeru
Zellner, Arnold
Place of publication United Kingdom
Publisher Cambridge University Press
Collection year 2010
Language eng
Subject C1
140104 Microeconomic Theory
140302 Econometric and Statistical Methods
140299 Applied Economics not elsewhere classified
Abstract Consistent real income comparisons over time and space are critical for studies on catch-up and convergence. The paper provides an analytical framework for making real income comparisons across countries and over time that satisfy transitivity and at the same time reflect an underlying nonhomothetic utility function for a representative consumer. The concept of reference price comparisons is developed and implemented using nonhomothetic translog and almost ideal demand systems. The paper discusses a direct approach, which uses all the parameters of the demand system to make real income comparisons, and an indirect approach, which adjusts the national price-based comparisons using reduced information only on income elasticities of demand. The proposed approach is empirically implemented using data from the 1980 and 1996 benchmark data from the International Comparison Program, and the empirical results confirm the analytical results discussed in the paper.
Keyword Real Income Comparisons
Constant Price Comparisons
National Price-Based Comparisons
Transitivity
Nonhomothetic Preferences
Translog Expenditure Function
Almost Ideal Demand System
Q-Index Code C1
Q-Index Status Confirmed Code

Document type: Journal Article
Sub-type: Article (original research)
Collections: 2010 Higher Education Research Data Collection
School of Economics Publications
 
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Created: Sat, 27 Mar 2010, 02:57:07 EST by Alys Hohnen on behalf of School of Economics