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Comparing Living Standards Across Nations: Real Incomes at the Top, the Bottom and the Middle

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  • Lee Rainwater
  • Timothy Smeeding

Abstract

What is the distribution of real income within and across countries? The purpose of this paper is to try to answer this question by presenting estimates of the real purchasing power (PPP) parity-adjusted distribution of disposable income for a number of countries. The major tool for converting (relative) nominal national incomes into real incomes are ""purchasing power parities"" or PPPs. While these PPPs are designed for aggregate macroeconomic statistics, not for microdata-based measures of disposable income, careful comparisons can yield approximate answers to the questions posed. In fact, we find that comparisons of ""real"" economic well-being or ""living standards"" look very different across countries depending on where in the income distribution one decides to measure them: top, bottom, or middle. The next section of the paper introduces the issue by defining terms, measurement issues, and data. Next we move to comparing macroeconomic ""average"" incomes and microdata-based ""relative"" incomes across-countries, before moving to PPP-adjusted distributional measures of living standards for all households and for households with children. We include children as a separate group here because most analysts argue that children are a particularly scarce resource in modern rich societies and that nations may be judged by the way they treat their children.

Suggested Citation

  • Lee Rainwater & Timothy Smeeding, 2002. "Comparing Living Standards Across Nations: Real Incomes at the Top, the Bottom and the Middle," LIS Working papers 266, LIS Cross-National Data Center in Luxembourg.
  • Handle: RePEc:lis:liswps:266
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    References listed on IDEAS

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    1. Timothy Smeeding & Gunther Schmaus & Brigitte Buhmann & Lee Rainwater, 1988. "Equivalence Scales, Well-Being, Inequality and Poverty: Sensitivity Estimates Across Ten Countries Using the LIS Database," LIS Working papers 17, LIS Cross-National Data Center in Luxembourg.
    2. repec:bla:revinw:v:39:y:1993:i:3:p:229-56 is not listed on IDEAS
    3. Bruce Bradbury & Markus Jantti, 1999. "Child Poverty across Industrialized Nations," Papers iopeps99/70, Innocenti Occasional Papers, Economic Policy Series.
    4. Andrzej Grodner & Timothy Smeeding, 2000. "Changing Income Inequality in OECD Countries: Updated Results from the Luxembourg Income Study (LIS)," LIS Working papers 252, LIS Cross-National Data Center in Luxembourg.
    5. Brigitte Buhmann & Lee Rainwater & Guenther Schmaus & Timothy M. Smeeding, 1988. "Equivalence Scales, Well‐Being, Inequality, And Poverty: Sensitivity Estimates Across Ten Countries Using The Luxembourg Income Study (Lis) Database," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 34(2), pages 115-142, June.
    6. repec:bla:revinw:v:34:y:1988:i:2:p:115-42 is not listed on IDEAS
    7. Timothy Smeeding, 1997. "American Income Inequality in a Cross-National Perspective: Why Are We So Different?," LIS Working papers 157, LIS Cross-National Data Center in Luxembourg.
    8. Richard V. Burkhauser & Timothy M. Smeeding & Joachim Merz, 1996. "Relative Inequality And Poverty In Germany And The United States Using Alternative Equivalence Scales," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 42(4), pages 381-400, December.
    9. Lee Rainwater, 1990. "Poverty and Equivalence as Social Constructions," LIS Working papers 55, LIS Cross-National Data Center in Luxembourg.
    10. Robert Summers & Alan Heston, 1991. "The Penn World Table (Mark 5): An Expanded Set of International Comparisons, 1950–1988," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 327-368.
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    Cited by:

    1. Lyle Scruggs & James Allan, 2005. "The Material Consequences of Welfare States: Benefit Generosity and Absolute Poverty in 16 OECD Countries," LIS Working papers 409, LIS Cross-National Data Center in Luxembourg.
    2. Michael F rster & Timothy Smeeding & David Jesuit, 2002. "Regional Poverty and Income Inequality in Central and Eastern Europe: Evidence from the Luxembourg Income Study," LIS Working papers 324, LIS Cross-National Data Center in Luxembourg.
    3. Lee Rainwater & Timothy Smeeding & Irwin Garfinkel, 2004. "Welfare State Expenditures and the Distribution of Child Opportunities," LIS Working papers 379, LIS Cross-National Data Center in Luxembourg.
    4. Lane Kenworthy, 2004. "Welfare States, Real Income and Poverty," LIS Working papers 370, LIS Cross-National Data Center in Luxembourg.
    5. Peter Burton & Shelley Phipps, 2008. "The Prince and the Pauper: Movement of Children Up and Down the Canadian Income Distribution, 1994-2004," Working Papers daleconwp2008-03, Dalhousie University, Department of Economics.
    6. Levy, Horacio, 2003. "Child-targeted tax-benefit reform in Spain in a European context: a microsimulation analysis using EUROMOD," EUROMOD Working Papers EM2/03, EUROMOD at the Institute for Social and Economic Research.
    7. Kimberly Ann. Elliott & Debayani Kar & J. David Richardson, 2004. "Assessing Globalization's Critics: "Talkers Are No Good Doers?"," NBER Chapters, in: Challenges to Globalization: Analyzing the Economics, pages 17-60, National Bureau of Economic Research, Inc.
    8. Timothy Smeeding, 2002. "Real Standards of Living and Public Support for Children: A Cross-National Comparison," LIS Working papers 345, LIS Cross-National Data Center in Luxembourg.
    9. David Jesuit & Lee Rainwater & Timothy Smeeding, 2002. "Regional Poverty within the Rich Countries," LIS Working papers 318, LIS Cross-National Data Center in Luxembourg.
    10. Juliana Martínez Franzoni & Diego Sánchez-Ancochea, 2015. "Public social services and income inequality," Chapters, in: Janine Berg (ed.), Labour Markets, Institutions and Inequality, chapter 11, pages 287-312, Edward Elgar Publishing.
    11. James Bryan, 2005. "Have the 1996 welfare reforms and expansion of the earned income tax credit eliminated the need for a basic income guarantee in the US?," Review of Social Economy, Taylor & Francis Journals, vol. 63(4), pages 595-611.

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