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Exchange rates, productivity, poverty and inequality

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  • Kenneth Clements
  • Yihui Lan

Abstract

This article analyses differences in the wealth of nations by comparing PPP-based cross-country incomes from the Penn World Table with those derived from prevailing exchange rates. Using the Balassa (1964)-Samuelson (1964) productivity-bias framework, we introduce the 'international poverty line' and illustrate the implications for cross-country income inequality. We demonstrate that our results are not inconsistent with the previous literature when appropriately interpreted.

Suggested Citation

  • Kenneth Clements & Yihui Lan, 2007. "Exchange rates, productivity, poverty and inequality," Applied Economics, Taylor & Francis Journals, vol. 39(4), pages 471-476.
    • Handle: RePEc:taf:applec:v:39:y:2007:i:4:p:471-476
    DOI: 10.1080/00036840500439101
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    1. Angus Deaton, 2005. "Measuring Poverty in a Growing World (or Measuring Growth in a Poor World)," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 1-19, February.
    2. Ravallion, Martin, 2001. "Growth, Inequality and Poverty: Looking Beyond Averages," World Development, Elsevier, vol. 29(11), pages 1803-1815, November.
    3. Bewley, Ronald & Fiebig, Denzil G, 1990. "Why Are Long-run Parameter Estimates So Disparate?," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 345-349, May.
    4. Martin Ravallion, 2003. "Measuring Aggregate Welfare in Developing Countries: How Well Do National Accounts and Surveys Agree?," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 645-652, August.
    5. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72(6), pages 584-584.
    6. Xavier Sala-i-Martin, 2001. "The disturbing 'rise' of global income inequality," Economics Working Papers 616, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 2002.
    7. Zellner, Arnold, 1978. "Estimation of functions of population means and regression coefficients including structural coefficients : A minimum expected loss (MELO) approach," Journal of Econometrics, Elsevier, vol. 8(2), pages 127-158, October.
    8. Samuelson, Paul A, 1994. "Facets of Balassa-Samuelson Thirty Years Later," Review of International Economics, Wiley Blackwell, vol. 2(3), pages 201-226, October.
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    Cited by:

    1. Ranjan Ray, 2017. "The Role of Prices in Welfare Comparisons: Methodological Developments and a Selective Survey of the Empirical Literature," The Economic Record, The Economic Society of Australia, vol. 93(301), pages 314-332, June.
    2. Long Hai Vo, 2021. "Understanding International Price and Consumption Disparities," Economics Discussion / Working Papers 21-01, The University of Western Australia, Department of Economics.
    3. Clements, Kenneth & Lan, Yihui & Roberts, John, 2008. "Exchange-rate economics for the resources sector," Resources Policy, Elsevier, vol. 33(2), pages 102-117, June.
    4. Amita Majumder & Ranjan Ray & Sattwik Santra, 2016. "Global and Country Poverty Rates, Welfare Rankings of the Regions and Purchasing Power Parities: How Robust Are the Results?," Monash Economics Working Papers 11-16, Monash University, Department of Economics.
    5. Kenneth W Clements & Yihui Lan & Haiyan Liu & Long Vo, 2022. "The Icp, Ppp And Household Expenditure Patterns," Economics Discussion / Working Papers 22-18, The University of Western Australia, Department of Economics.

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