We provide an overview of the theory and practice of constructing PPPs. We focus on four practical areas: how to handle international differences in quality; the treatment of urban and rural areas of large countries; how to estimate prices for government services, health, and education; and the effects of the regional structure of the latest International Comparison Program for 2005. We discuss revisions
of the Penn World Table, and their effects on econometric analysis, and include health warnings. Some international comparisons are close to impossible, even in theory, and in others, the practical difficulties make comparison exceedingly hazardous. (JEL C43, E01, E31, O57).
Deaton, Angus, and Alan Heston.
"Understanding PPPs and PPP-Based National Accounts."
American Economic Journal: Macroeconomics,
Index Numbers and Aggregation; leading indicators
Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
Price Level; Inflation; Deflation
Comparative Studies of Countries