Reshaping the World: The 2005 Round of the International Comparison Program

Abstract

I provide a brief and non-technical introduction to the 2005 round of the International Price Comparison Program. I explain why it is necessary to collect prices around the world, and why the 2005 round is better than its predecessors. It covers more countries, so that fewer country results are imputed, it collects prices in a systematic way that was tightly controlled from a central office, the prices comparisons are much closer to “like with like” than in previous rounds, and the linking of the regions - which is key to generating a single set of global comparisons - was carefully thought out in advance and systematically applied. The new numbers “reshape” the world and in particular, poor countries are now typically estimated to be poorer relative to rich countries than was previously thought to be the case. In consequence, estimates of world income inequality are markedly higher using the new ICP. The relative PPP exchange rates between poor countries change by much less so that, judged by poor world standards (e.g. relative to a poverty line held fixed in Indian rupees), there is little change to measures of global poverty from the ICP revision.

Keywords: International Comparisons, ICP, Poverty, Inequality