Inequality and GDP

Income rankings and international income differences strongly depend on cross-country relative prices.
Cross-country inequality in GDP per capita depends crucially on measures of cross-country relative prices: the purchasing power parities (PPPs). Yet new information on PPPs tends to spark furious debate, as relative income rankings get shuffled and international income differences are compressed or widened. In this lecture, Robert Inklaar from the University of Groningen discusses some of the measurement challenges that can lead to these surprises, and how best to deal with the ensuing uncertainty. The consequences of these measurement challenges are analysed in the context of current debates about global inequality and poverty, and in a historical perspective regarding the long-run shape of cross-country income inequality.