Estimating Income / Expenditure Differences across Populations: New Fun with Old Engel’s Law

Estimating Income / Expenditure Differences across Populations: New Fun with Old Engel’s Law. Center for Global Development. Lant Pritchett and Marla Spivak. August 27, 2013.

How much larger are the consumption possibilities of an urban U.S. household with per capita expenditures of 1,000 U.S. dollars per month than a rural Indonesian household with per capita expenditures of 1,000,000 Indonesian Rupiah per month? Consumers in different markets face widely different consumption possibilities and prices and hence the conversion of incomes or expenditures to truly comparable units of purchasing power is extremely difficult. The authors propose a simple supplement to existing purchasing power adjusted currency conversions. [Note: contains copyrighted material].

[PDF format, 45 pages, 871.3 KB].

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