The Empirical Welfare Content of International Price and Income Comparisons
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arXiv
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| Format: | Preprint |
| Published: |
2025
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| _version_ | 1866911310565867520 |
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| author | Wu, Hubert |
| author_facet | Wu, Hubert |
| contents | Multilateral index numbers are often used to make claims about welfare, such as treating PPPs as cross-country costs of living or real incomes as indicators of living standards. However, such interpretations may not be consistent with the observed data. To study this problem, I derive multilateral bounds on welfare implied by revealed preference and use these to appraise leading comparison methods. My findings support the welfare-interpretability of the contemporary indices I examine, but not of market exchange rates. When using a welfare-consistent multilateral index, the world in 2017 appears larger and more equal vis-à-vis the United States than conventional measures. |
| format | Preprint |
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arxiv_https___arxiv_org_abs_2504_16654 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | The Empirical Welfare Content of International Price and Income Comparisons Wu, Hubert General Economics Economics Multilateral index numbers are often used to make claims about welfare, such as treating PPPs as cross-country costs of living or real incomes as indicators of living standards. However, such interpretations may not be consistent with the observed data. To study this problem, I derive multilateral bounds on welfare implied by revealed preference and use these to appraise leading comparison methods. My findings support the welfare-interpretability of the contemporary indices I examine, but not of market exchange rates. When using a welfare-consistent multilateral index, the world in 2017 appears larger and more equal vis-à-vis the United States than conventional measures. |
| title | The Empirical Welfare Content of International Price and Income Comparisons |
| topic | General Economics Economics |
| url | https://arxiv.org/abs/2504.16654 |