Comparing Living Standards Across Nations Real Incomes at the Top, the Bottom, and the Middle

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Abstract
The types of yardsticks used by economists to measure living standards (or economic well-being across nations) are basically two. Macroeconomists use aggregate gross domestic product (GDP) per capita—a single value summary of economic output per person in a nation—to measure economic well-being. By converting currencies into comparable dollars (into real ‘purchasing power adjusted’ terms) one creates a ‘one number per country’ measure of economic wellbeing. In contrast, microeconomists compare the distribution of disposable income across households to assess the distribution of economic well-being, expressed in terms of income per equivalent adult (or per equivalent child). Here the comparisons of well-being are almost always relative ‘within-nation’ comparisons of many points in the income distribution, including measures of central tendency such as the median or mean, but also the spread of incomes among people.
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Author(s)
Smeeding, Timothy M.
Rainwater, Lee
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Publication Year
2002
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Working Paper
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UNSW Faculty
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