Edited by Edward N. Wolff
Chapter 6: Comparing Living Standards Across Nations: Real Incomes at the Top, the Bottom, and the Middle
6. Comparing living standards across nations: real incomes at the top, the bottom, and the middle Timothy M. Smeeding and Lee Rainwater* INTRODUCTION The types of yardsticks used by economists to measure living standards (or economic well-being across nations) are basically two. Macroeconomists use aggregate 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 well-being. 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. These analyses lead to dissatisfying results from both perspectives. Real GDP per capita includes much more than is actually consumed by households, and by deﬁnition ignores the distribution of income among households (within countries). Distributions of income measure diﬀerences in sustainable consumption across the population within a country, but they are only relative and thereby ignore diﬀerences in ‘real’standards of living across countries. The usual exchange over these diﬀerences as they concern the United States runs something like this: the ﬁrst analyst suggests that ‘the United States is the richest nation on earth’,...
You are not authenticated to view the full text of this chapter or article.
Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.
Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.
Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.