Who uses PPPs – Examples of Policy-making Uses


 

Real GDP and Cost of Living Comparisons:

  • Growth rate differentials and contributing factors
  • Relative size and structure of the economy
  • Implications for national aid eligibility and poverty count
  • Wage pressure and competitiveness implications
  • Effects of variation in costs on economic well-being

Global Poverty and International Income Inequality:

  • Global poverty measurements rely heavily on PPPs. Continuous production of PPP data is important for updating global poverty measures and monitoring the Sustainable Development Goal (SDG) progress
    • Guides development policy focus at the local, national and regional levels
    • Improves identification of the poor and the viability of global poverty goals
  • Rising income inequality has increasingly become a major concern. PPPs are (one of the methods) used to convert the incomes in different countries to a common measure
    • Improving growth models and forecasting the future allocation of global income
    • Implications for social and political stability, migration flows and geopolitical impact

Health and Education:

  • Education and health have direct influence on the levels of poverty and inequality
  • Sustained economic growth is closely linked to education
  • Effects of high cost of health care

Productivity, Competitiveness, Trade and Investment:

  • Comparing the competitiveness and efficiency of production systems across countries
    • PPPs infer productivity differences across countries
  • Cross-country price data reveals an interesting feature; the positive correlation between levels of development and the price of services relative to tradable goods
    • Distortions to the price of tradable capital goods as a barrier to development
  • PPPs can be an instrument to compare cross-country investment costs, such as labor and material costs
    • Barriers to attracting foreign investments

Energy Efficiency:

  • Improvements in energy efficiency bring social, economic and environmental benefits
  • Address costs, availability and environmental impact of energy use
  • Improved efficiency, health, industrial productivity and product performance
  • Wealth creation and social development