International Comparisons of Real Incomes [antikvár]

THE SCOPE AND OBJECT OF REAL INCOME COMPARISONS Objectives of Comparisons There have been many attempts during the past ten years or more to obtain some estimates of the relative real incomes per head of vari- ous countries. Various purposes may be served by such international comparisons of real income, and some of the comments made below on the relative merits of the different attempts and of other possible methods will be clearer if preceded by a brief list of some of the uses to which they may be put. First, in a general way, the increase in our understanding of the phenomenon of economic growth and development must, as in any science, depend on comparisons between different situations. To make such comparisons usefully, it is usually necessary to correct for irre- levant and undesirable incomparabilities. One of the most important of these, in the context of inter-country comparisons, is the difference between countries with respect to the internal purchasing power of their currencies. Secondly, the relative level of real income plays a prominent role in many, if not most, well-known theories of economic growth. The verification of these theories thus requires estimates of relative real incomes. Thirdly, relative real incomes are one of the criteria used by major aid-giving countries in allocating aid. This is certainly the case for the USA, and recently the British government announced that it would be a major criterion in its new policy concerning the granting of interest free loans. Fourthly, in the course of their planning work, many developing countries use analogies with other countries in forecasting the likely development of the structure of their output or expenditure, under given assumptions concerning changes in their income levels. Such analogies can only be used if they have reasonably reliable indicators of the real difference between their own income levels and those of the countries being used as standards. Fifthly, work on the extent to which one can identify systematic changes in the patterns of output and employment as income rises (such as that by Chenery and Kuznets) can be substantially enriched if the relative income data are in nreal"terms. In addition to these uses to which the results of real income com- parisons may be put, a beneficial by-product of certain approaches to the estimation of relative real incomes is the substantial improvement it usually engenders in the basic national accounts data of the countries concerned.