International income inequality : measuring PPP bias by estimating Engel curves for food

摘要

Price-adjusted data on national incomes applied in cross-country compar-isons are measured with bias. By studying micro data, this paper ¯nds thatthe bias is systematic: the poorer a country is, the more its income tends tobe overestimated. Consequently, international income inequalities are under-estimated.The bias in the macro price variables (PPPs), is caused by factors ana-logues to those creating bias in consumer price index numbers (CPIs). Ex-ploiting this fact, the PPP bias is measured by estimating Engel curves for food, a method already established to measure CPI bias.