The Big Mac Index and Real-Income Disparity

Journal of Business and Economics Research, Vol. 12 Issue 3, pp. 231-236, 2014.

6 Pages Posted: 19 Apr 2014 Last revised: 4 Jul 2014

See all articles by Vidya Atal

Vidya Atal

Montclair State University - Feliciano School of Business

Date Written: March 17, 2014

Abstract

The Big Mac Index was introduced to (semi-humorously) test the theory of purchasing power parity and measure the disparity in currency values. Instead, in this paper, we consider this index to find out the per capita real-income disparity across 54 countries. We find that the per capita real-income can be very low in some countries even when Big Mac burgers are very cheap, like in India. Among these countries, Hong Kong’s per capita Big Mac affordability is the highest with 47 burgers daily whereas Pakistan’s people could afford just one a day. Additionally, we find that Russia and China’s Big Mac affordability has been significantly increasing over the last decade, Brazil’s has remained more or less constant, however USA’s Big Mac affordability has been falling, indicating that per capita real-income of Americans has been decreasing over the last decade. Finally, we find that increased role of the government might be negatively correlated to per capita real-income. Czech Republic has been experiencing increased Big Mac affordability as the country has been reducing the government’s role; whereas Argentina has been experiencing reduced Big Mac affordability as the country has been moving left and increasing the government’s power.

Keywords: Big Mac Index, Purchasing Power, Affordability, Real-income Disparity

JEL Classification: E2, E3, H6

Suggested Citation

Atal, Vidya, The Big Mac Index and Real-Income Disparity (March 17, 2014). Journal of Business and Economics Research, Vol. 12 Issue 3, pp. 231-236, 2014.. Available at SSRN: https://ssrn.com/abstract=2426207

Vidya Atal (Contact Author)

Montclair State University - Feliciano School of Business ( email )

Department of Economics
1 Normal Avenue
Montclair, NJ 07043
United States
(973)655-7403 (Phone)

HOME PAGE: http://https://sites.google.com/site/vidyaatal/home

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