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Subnational purchasing power of parity in OECD countries: Estimates based on the Balassa-Samuelson hypothesis

Author

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  • Alex Costa
  • Jaume Garcia
  • Josep Lluís Raymond
  • Daniel Sanchez-Serra

Abstract

Due to the lack of Purchasing Power Parities (PPPs) at regional level, regional Gross Domestic Product (GDP) figures have been traditionally adjusted using national PPPs. The simplifying assumption that all regions of a country have the same cost of living, and implicitly that there are no regional differences in prices, might lead to regional GDP figures (adjusted for national PPPs) that are biased and might limit the design and implementation of regional policies. This paper tries to overcome this problem by estimating PPPs at subnational level (TL2 regions) for OECD countries through a new method which uses publicly available data and is based on the Balassa-Samuelson hypothesis.

Suggested Citation

  • Alex Costa & Jaume Garcia & Josep Lluís Raymond & Daniel Sanchez-Serra, 2019. "Subnational purchasing power of parity in OECD countries: Estimates based on the Balassa-Samuelson hypothesis," OECD Regional Development Working Papers 2019/12, OECD Publishing.
    • Handle: RePEc:oec:govaab:2019/12-en
    DOI: 10.1787/3d8f5f51-en
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    Cited by:

    1. Laureti Tiziana & Polidoro Federico, 2022. "Using Scanner Data for Computing Consumer Spatial Price Indexes at Regional Level: An Empirical Application for Grocery Products in Italy," Journal of Official Statistics, Sciendo, vol. 38(1), pages 23-56, March.
    2. Ilaria Benedetti & Tiziana Laureti & Luigi Palumbo & Brandon M. Rose, 2022. "Computation of High-Frequency Sub-National Spatial Consumer Price Indexes Using Web Scraping Techniques," Economies, MDPI, vol. 10(4), pages 1-20, April.
    3. Amita Majumder & Ranjan Ray, 2020. "National and subnational purchasing power parity: a review," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 47(2), pages 103-124, June.
    4. Gregorio Izquierdo Llanes & Antonio Salcedo Galiano, 2023. "Why does equivalization matter? An application to the monetary poverty in the sustainable development goals framework," Quality & Quantity: International Journal of Methodology, Springer, vol. 57(3), pages 2575-2589, June.
    5. Barbrook-Johnson, Peter & Tankwa, Brendon, 2023. "Increasing inequality between countries in key renewable energy costs," INET Oxford Working Papers 2023-20, Institute for New Economic Thinking at the Oxford Martin School, University of Oxford.

    More about this item

    Keywords

    Balassa-Samuelson hypothesis; regional price levels; Regional Purchasing Power Parity;
    All these keywords.

    JEL classification:

    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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