Poverty, prices and international inequality

The project focuses on global poverty and international inequality. For the measurement of both, it is necessary to adjust for price level differences across countries - in order to obtain comparable real income figures. The methods underlying this Purcha sing Power Parity (PPP) adjustment are however disputed, and this creates uncertainty about trends in poverty and inequality over time. Furthermore, there is a discrepancy between poverty figures and economic growth figures for poor countries; either are poverty figures too pessimistic, or growth figures too optimistic. The project will therefore examine the development of prices in poor countries, and how changes in prices affect our measures of inequality and poverty. International price data will be c ombined with data on openness to trade and other country data, in order to assess the extent of price divergence or convergence, the determinants of such convergence, and the implications for poverty measurement. Theoretically, this analysis will draw on recent research on economic geography and international trade, that may contribute to explaining why some markets remain segmented with large price differences, even in the presence of increased international integration. The ambition of the project is to contribute to a better understanding of why poor countries have lower price levels, how this changes with development, how it is affected by globalisation, and how it affects poverty as well as poverty measurement.