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Purchasing power parities and the Dollar-A-Day approach: An unstable relationship

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  • Moatsos, Michail
  • Lazopoulos, Achillefs

Abstract

We show that the Dollar-A-Day methodology in global poverty measurement provides inconsistent International Poverty Line (iPL) solutions when a complete set of consistency criteria in the iPL definition is used. This article illustrates that minor fluctuations in purchasing power parity exchange rates can yield inconsistent iPLs. We find a rate of inconsistency of 46.1% and we conclude that this is a worrisome attribute of the method.

Suggested Citation

  • Moatsos, Michail & Lazopoulos, Achillefs, 2021. "Purchasing power parities and the Dollar-A-Day approach: An unstable relationship," Economics Letters, Elsevier, vol. 206(C).
    • Handle: RePEc:eee:ecolet:v:206:y:2021:i:c:s0165176521002512
    DOI: 10.1016/j.econlet.2021.109974
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    References listed on IDEAS

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    1. Martin Ravallion & Gaurav Datt & Dominique van de Walle, 1991. "Quantifying Absolute Poverty In The Developing World," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 37(4), pages 345-361, December.
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    4. Martin Ravallion & Shaohua Chen & Prem Sangraula, 2009. "Dollar a Day Revisited," The World Bank Economic Review, World Bank, vol. 23(2), pages 163-184, June.
    5. Moatsos, Michail & Lazopoulos, Achillefs, 2021. "Global poverty: A first estimation of its uncertainty," World Development Perspectives, Elsevier, vol. 22(C).
    6. D. S. Prasada Rao & Alicia Rambaldi & Howard Doran, 2010. "Extrapolation Of Purchasing Power Parities Using Multiple Benchmarks And Auxiliary Information: A New Approach," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 56(s1), pages 59-98, June.
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    8. Angus Deaton & Olivier Dupriez, 2011. "Spatial price differences within large countries," Working Papers 1321, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
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    Cited by:

    1. Moyer, Jonathan D., 2023. "Blessed are the peacemakers: The future burden of intrastate conflict on poverty," World Development, Elsevier, vol. 165(C).

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    More about this item

    Keywords

    Global poverty; PPP; Error; Dollar-A-Day; Inconsistency; Monte Carlo;
    All these keywords.

    JEL classification:

    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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