International Comparisons of Living Standards by Equivalent Incomes
International Comparisons of Living Standards by Equivalent Incomes
By Guillaume Gaulier, and Marc Fleurbaey
The Scandinavian Journal of Economics (2009)
Abstract Paper

Marc Fleurbaey

Princeton University

United States

Coder Page  

Guillaume Gaulier

Banque de France

France

Coder Page  

The purpose of this code is to propose an international comparison of measures of living standards for a sample of 24 OECD countries for the year 2004. Based on GDP per capita, the measure incorporates corrections for international flows of income, labor, risk of unemployment, healthy life expectancy, household demography and inequalities. The code displays the GDP per capita, the GDP relative position and the GDP ranking, the absolute value of each correction in dollar terms (per capita), the relative position of countries after each correction and the ranking of countries after each cumulative correction. The user can choose some parameters specific to each correction (for more details see Fleurbaey and Gaulier, 2009).
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Abstract
We propose a measure of living standards for international comparisons. Based on GDP per capita, the measure incorporates corrections for international flows of income, labor, risk of unemployment, healthy life expectancy, household demography and inequalities. The method for comparing populations that differ in some non-income dimension consists of computing the equivalent variation of income that would make each population indifferent between its current situation and a reference situation with respect to the non-income dimension. This is applied to 24 OECD countries. The obtained ranking of countries differs substantially from the GDP ranking.
Gaulier, G., and M. Fleurbaey, "International Comparisons of Living Standards by Equivalent Incomes", The Scandinavian Journal of Economics , 111, 597-624.
Correction for equivalent income
Correction for equivalent income
Consumption prices
Health
Household composition
Inequalities
Labor
Risk of unemployment
Discount factor
Discount factor
Coefficient of Relative Risk Aversion
Coefficient of Relative Risk Aversion
Unemployment stigma
Unemployment stigma
Household scale
Household scale
Social preference for equality
Social preference for equality
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Please cite the publication as :

Gaulier, G., and M. Fleurbaey, "International Comparisons of Living Standards by Equivalent Incomes", The Scandinavian Journal of Economics , 111, 597-624.

Please cite the companion website as :

Gaulier, G., and M. Fleurbaey, "International Comparisons of Living Standards by Equivalent Incomes", RunMyCode companion website, http://www.execandshare.org/CompanionSite/Site71

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Variable/Parameters Description, constraint Comments
Correction for equivalent income
    The living conditions used to compute corrections.
    Discount factor
      The annual discount factor. With a high discount factor international corrections for unemployment risk and life expectancy are smaller.
      Coefficient of Relative Risk Aversion
        The coefficient of relative risk aversion. A large CRRA implies large corrections for life expectancy and unemployement risk.
        Unemployment stigma
          The stigma of being unemployed.
          Household scale
            The coefficient in the household size correction. It is the coefficient of economies in scale in households, or more intuitively the share of consumption concerned by those economies of scale (housing and food costs, some insurances, sharing of a car…)
            Social preference for equality
              The coefficient of social preference for equality.
              Variable/Parameters Description Visualisation
              Correction for equivalent income We compute corrections by using the following living conditions: consumption prices, labor, risk of unemployment, health, household composition and inequalities.
              Discount factor The annual discount factor equals 0.03.
              Coefficient of Relative Risk Aversion We use a coefficient of risk aversion equal to 0.8.
              Unemployment stigma The stigma of being unemployed translates into replacement rates 20 percentage points below the observed replacement rate.
              Household scale The coefficient in the household size correction is 0.5.
              Social preference for equality The coefficient of social preference for equality is 1.5.
              International Comparisons of Living Standards by Equivalent Incomes
              M. Fleurbaey, and G. Gaulier (2012)
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