Disparities in Incomes and Prices Internationally

Kenneth Clements, Xing Gao, Thomas Simpson

Research output: Working paperDiscussion paper

21 Downloads (Pure)


The dispersion of the distribution of relative prices in poor countries is substantially higher than that in the rich. As in 130+ countries relative prices are closely related to incomes, we develop a model that shows that the prices of luxuries (necessities) rise (fall) with income growth. This model provides a link between price dispersion and incomes that leads to several interesting concepts, including minimum-variance income and dispersion-equivalent income, the income needed to compensate for higher dispersion, which are illustrated with data from the International Comparison Program. The paper also contains an analysis of the welfare cost of higher dispersion in poorer countries.
Original languageEnglish
PublisherUWA Business School
Publication statusPublished - 2012

Publication series

NameEconomics Discussion Papers


Dive into the research topics of 'Disparities in Incomes and Prices Internationally'. Together they form a unique fingerprint.

Cite this