The Transport Bias in Comparisons of National Income

Bibliographic Data

ID9722185
AuthorsDan Usher (corresponding author)
Year1963
Volume30
Issue118
Pages140
Publication date1963-05-01
Peer ReviewedYes
Open AccessNo
TypeARTICLE
VenueEconomica (JOURNAL)
Journal identifiersISSN: 0013-0427 • E-ISSN: 1468-0335
PublisherJSTOR (PUBLISHER)
DOI10.2307/2601458
OpenAlexW2312681050
LanguageEN
Citations received27

It is generally recognized that the usual method of comparing national income-conversion by the foreign exchange rate into U.S. dollars (or other common currency) per capita-exaggerates differences in living standards between rich and poor countries. This recognition has led many authors to make comparisons of national income at a uniform set of prices. The major landmarks are the work of Colin Clark,2 Kuznets,3 and Gilbert and Kravis.4 The results of different systems of international comparison may vary so materially as to swamp differences merely due to deficiencies in the basic statistical data. For example, the conventional comparison shows that the per capita national income of the United Kingdom is about fourteen times that of Thailand. Recomputations made by the author to allow for various biases in the comparison suggest that the effective ratio of living standards is about three to one.5 Even if the recomputed ratio is doubled, the change in order of magnitude is large enough to affect our way of thinking about the underdeveloped countries. It is less well known why this exaggeration of income differentials takes place. Income is quantity multiplied by price; fundamentally there can only be two sorts of reasons, those associated with the quantities of goods compared and those associated with the operation of the price mechanism. The theory of the comparison of quantities has been examined exhaustively by Kuznets. Most of the difficulties boil down to the decisions as to what constitutes income, and as to the distinction between cost of production and income. The rule in ordinary national income accounting is that all expenditures by final consumers together with govemment expenditures and investment are income, and that all other expenditures are costs of production. Some rule like this is

Currency · Economics · Exaggeration · Macroeconomics · Measures of national income and output · Order (exchange) · Per capita · Per capita income · Population · Standard of living · Global Financial Crisis and Policies · Global trade and economics · Monetary Policy and Economic Impact

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