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True Multilateral Indexes for International Comparisons of Real Income: Theory and Empirics

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  • Neary, Peter

Abstract

I introduce a utility-consistent benchmark for international comparisons of real income, the GAIA (?Geary-Allen International Accounts?) System. It coincides with the Geary method (which underlies the Penn World Table) when preferences are Leontief and with the EKS method (favoured by OECD) when preferences are homogeneous quadratic. The Geary method seems preferable since it gives a (possibly poor) approximation to a consistent set of international comparisons, whereas the EKS method gives a good approximation to an inconsistent set. An illustrative empirical application, using estimates of a QUAIDS demand system, suggests that both methods impose excessive ?convergence? on the data.

Suggested Citation

  • Neary, Peter, 2000. "True Multilateral Indexes for International Comparisons of Real Income: Theory and Empirics," CEPR Discussion Papers 2590, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:2590
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    3. Bettina Aten & Eric Figueroa & Troy Martin, 2011. "Notes on Estimating the Multi-Year Regional Price Parities by 16 Expenditure Categories: 2005-2009," BEA Working Papers 0071, Bureau of Economic Analysis.
    4. Robert J. Hill & T. Peter Hill, 2007. "Regionalization and its Implications for Price Index Construction: The Case of the International Comparisons Program," Discussion Papers 2007-28, School of Economics, The University of New South Wales.
    5. Robert J. Hill & Daniel Melser, 2007. "Comparing House Prices Across Regions and Time: An Hedonic Approach," Discussion Papers 2007-33, School of Economics, The University of New South Wales.

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    More about this item

    Keywords

    International comparisons of real incomes; Exchange rates; Purchasing power parities; Index numbers of prices and real incomes; Geary method; Penn world table; Gaia system; Quaids (quadratic almost ideal demand system);
    All these keywords.

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • F00 - International Economics - - General - - - General

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