Purchasing Power Parity Adjustment Research Articles

Frailty prevalence in 42 European countries by age and gender: development of the SHARE Frailty Atlas for Europe

Comparative frailty prevalence data across European countries is sparse due to heterogeneous measurement methods. The Survey of Health, Ageing and Retirement (SHARE) initiative conducted interviews with probability sampling of non-institutionalized elderly people in several European countries. Previous frailty analyses of SHARE datasets were limited to initial SHARE countries and did not provide age- and gender-stratified frailty prevalence. Our aim was to provide age- and gender-stratified frailty prevalence estimates in all European countries, with predictions where necessary. From 29 SHARE participating countries, 311,915 individual surveys were analyzed. Frailty prevalence was estimated by country and gender in 5-year age bands using the SHARE Frailty Instrument and a frailty index. Association of frailty prevalence with age, gender, and GDP per capita (country-specific economic indicator for predictions) was investigated in multivariate mixed logistic regression models with or without multiple imputation. Female gender and increasing age were significantly associated with higher frailty prevalence. Higher GDP per capita, with or without purchasing power parity adjustment, was significantly associated with lower frailty prevalence in the 65–79 age groups in all analyses. Observed and predicted data on frailty rates by country are provided in the interactive SHARE Frailty Atlas for Europe. Our study provides age- and gender-stratified frailty prevalence estimates for all European countries, revealing remarkable between-country heterogeneity. Higher frailty prevalence is strongly associated with lower GDP per capita, underlining the importance of investigating transferability of evidence across countries at different developmental levels and calling for improved policies to reduce inequity in risk of developing frailty across European countries.

COMPARATIVE ANALYSIS OF FOREIGN AND DOMESTIC ENERGY EFFICIENCY INDICATORS AND THEIR CALCULATION

Climate change, the level of environmental pollution, the assessment of the exhaustion of traditional raw materials for energy generation, the awareness of the fact that the negative impact on the environment is caused by anthropogenic activities, the world economic crises and the search for ensuring a happy and safe life for future generations became the driving force for the development of energy efficiency. But in order to understand the individual directions of tasks in increasing the level of energy efficiency, it is worth defining approaches to its assessment. It is interesting that this field includes not only the concept of "energy", but also has a connection and to some extent limitations with the fields of economics, ecology and law.
 This paper analyzes the concepts and approaches used in assessing the level of energy efficiency internationally and in the middle of the country. The results of the analysis showed that in global practice, energy efficiency assessment based on final consumption is used in four spheres of activity: production, transport, services and households. In each of the subsectors, the energy consumption indicator is evaluated in comparison with the previous year. And the index at the sector level is the average weighted sum of the indicators of its subsectors. To obtain better results, various types of adjustments are used. Climate corrections and purchasing power parity adjustments are one of them. To increase the level of energy efficiency within the country, it is possible to apply the listed practices at the regional level.

Carbon Intensity of Banks’ Loan Portfolio : A Good Basis for Comparison in Case of LowIncome Countries?

In recent years, more and more credit institutions have been publishing the financed carbon footprint of their loan portfolio, enabling comparisons across institutions, for which investors and supervisors tend to use the carbon intensity of portfolios expressed as a proportion of the financed carbon footprint-to-total loan volumes. In this article, it is argued that such comparisons are unfair to low-income countries with low price levels, as they show the same activity as being more “carbonintensive” in a low-income country than in a high-income country. The magnitude of such distortions can be significant, amounting to as much as 3 to 7-fold just within the European Union itself. As differences resulting from price levels do not actually represent differences in the carbon intensity of individual countries’ real economy and are also not an “own choice” of these countries (but rather a consequence of the Balassa-Samuelson effect), it is argued that the comparison of carbon intensity of different banks’ loan portfolios should be conducted using purchasing power parity adjustments – if not necessarily for investors, at least in the practice of financial supervisory authorities.

Shortages and price variability of essential cytotoxic medicines for treating children with cancers

IntroductionLow-income and middle-income countries (LMICs) face the largest burden of mortality from childhood cancers with limited access to curative therapies. Few comparative analyses across all income groups and world regions...

TESTING PURCHASING POWER PARITY IN SOME EMERGING ECONOMIES IN THE LONG-RUN

ABSTRACT In this paper, we examine the long-run purchasing power parity (PPP) by testing for a unit root in real exchange rates between the US and 14 emerging economies from 1st January 1990 to 31st December 2018. The main objective of this paper is to investigate the real exchange rate adjustment for these emerging economies using both standards linear and nonlinear of exponential smooth transition autoregressive (ESTAR) model. Specifically, the objective is to estimate the PPP adjustment toward long-run equilibrium. The research also aims to model long-run validity of PPP hypothesis using bivariate vector error correction models which we can do with our data. The speed of adjustment is better captured that way as it a bivariate approach. The results seem to suggest that both linear and nonlinear unit root tests fail to reject the null hypothesis of the exchange rates for these emerging economies. One key policy implementation is that the validity of using PPP to decide the equilibrium exchange rate for these 8 countries. Moreover, our vector error correction model seems to suggest that most of the countries do not support PPP. Keywords unit root test; real exchange rates; panel data; non-stationary; Johansen cointegration test, vector error correction model

Cost-effectiveness of sorafenib versus best supportive care in advanced hepatocellular carcinoma in Egypt

Background: In light of constrained budgets and the need to fund efficient treatment options, this study set out to assess the cost-effectiveness of sorafenib as a first-line treatment of hepatocellular carcinoma (HCC) compared to best supportive care (BSC) from the military hospital perspective in Egypt.Methods: A decision analytic Markov model simulated disease progression with clinical parameters and utility values derived from published data. Data on direct medical costs were collected from the local healthcare system or payer. Costs and effects were discounted at 3.5% annually and reported in USD using purchasing power parity adjustments. Deterministic and probabilistic sensitivity analyses were conducted.Results: Mortality occurred less frequently in the sorafenib group (sorafenib group: 99.96%, BSC group: 99.99%). The total quality-adjusted life years (QALYs) of the sorafenib cohort were estimated to be 46.24 compared with 42.27 for the BSC cohort, which resulted in an incremental gain of 3.96 QALYs. The total costs for the sorafenib and BSC cohorts were USD 4,229,940 and USD 3,092,886, respectively (incremental cost = $1,137,054), resulting in an incremental cost-effectiveness ratio (ICER) of USD 286,776 per QALY gained for the sorafenib cohort. One-way sensitivity analyses that addressed the uncertainty of the BSC estimates indicated that the progression-free survival for BSC and utility value of progression had the greatest effects on the results.Conclusion: This study concluded that sorafenib does offer increased survival and quality-of-life at an increased cost but at an ICER that exceeds the nationally accepted cost-effectiveness threshold. The findings support healthcare decision-making of the efficient allocation of healthcare system resources to improve the health of the Egyptian population. Whether sorafenib is cost-effective in specific sub-groups with additional risk factors needs to be addressed in future studies.

Better Global Assessment of Worker Inequality: Comment on “The Employment Footprints of Nations”

SummaryThis commentary responds to the previously published Journal of Industrial Ecology article “The Employment Footprints of Nations: Uncovering Master‐Servant Relationships” by Alsamawi and colleagues. Their article uses extended input‐output analysis to calculate employment and income footprints and, consequently, quantifies and provides an analysis of the average wages embodied in consumption of countries in comparison with the wages received by domestic workers. In effect, Alsamawi and colleagues show the extent of inequality in labor income, especially between developed and developing economies, traced throughout the global supply chains, but ignore the price differentials existing between countries in their discussion of the welfare implications of global trade on workers. This commentary contends the appropriateness of adjusting nominal compensation of workers to purchasing power parity (PPP) when undertaking global comparisons that pertain to well‐being and recalculates the employment footprints and income footprints of nations with PPP adjustment. The price adjustment in this work is intended to show a more accurate depiction of the disparity among workers of different nations when their labor incomes are deflated by the index price of consumption goods in their country. Using observations covering 189 countries and 14,839 sectors for the period 1990–2011, the results of the adjustment reveal that the ratio of domestic wages to foreign wages paid in support of a country's consumption (footprint wages) tends to be underestimated for labor‐exporting countries (developing economies with relatively cheaper consumption goods) and overestimated for labor‐importing countries (developed economies with more expensive consumption goods), thus demonstrating, generally, relatively less income inequality than previously exposed.

Regional GDP in the UK, 1861–1911: new estimates

This article compares the Geary–Stark method for distributing known GDP totals across regions with a variation suggested by Crafts. Tests of the Geary–Stark method confirm that it generates accurate estimates of regional GDP. There are practical and conceptual problems with Crafts' extension, and it is not tested nor is it testable. New estimates of regional GDP for the period 1861 to 1911 contradict Crafts's suggestion of rising regional inequality. Purchasing power parity adjustments do not alter this trend. The new estimates confirm Ireland's post‐Famine catch‐up. The great bulk of Irish labour productivity growth can be accounted for by an upward shifting production function, though it can be argued that that portion of growth that represents catch‐up may be attributable to labour force decline.

Is there really a pot of gold at the end of the rainbow? Has the Occupational Specific Dispensation, as a mechanism to attract and retain health workers in South Africa, leveled the playing field?

BackgroundSouth Africa is experiencing a critical shortage of human resources for health (HRH) at a time when the population and the burden of ill-health, primarily due to HIV, AIDS and TB, are on the increase. This shortage is particularly severe within the nursing profession, which has witnessed significant emigration due to poor domestic working conditions and remuneration. Salaries and other benefits are an obvious pull factor towards foreign countries, given the often extreme international wage differentials. The introduction of the Occupation Specific Dispensation (OSD) in 2007 sought to improve the public services’ ability to attract and retain employees thereby reducing incentives to emigrate.MethodsUsing a representative basket of commonly bought goods (including food, entertainment, fuel and utilities), a purchasing power parity (PPP) ratio is an exchange rate between two currencies that equalises the international price of buying that basket. Our study makes comparisons, using such a PPP index, and allows the identification of real differences in salaries for our selected countries (South Africa, United States, United Kingdom, Canada, Australia and Saudi Arabia) for the same HRH professions. If PPP adjusted earnings are indeed different then this indicates an economic incentive to emigrate.ResultsSalaries of most South African HRH, particularly registered nurses, are dwarfed by their international counterparts (notably United States, Canada and Saudi Arabia), although the OSD has gone some way to reduce that disparity. All selected foreign countries generally offer higher salaries on a PPP adjusted basis. The United Kingdom ($43202) and Australia ($38622), in the category of Medical Officer, are the only two examples where the PPP adjustment brings the salary below what is being offered in South Africa ($50013 post OSD). The PPP adjusted salary differences between registered nurses is very slight for South Africa ($18884 post OSD), Australia ($21784) and the United Kingdom ($20487). All other foreign countries show large salary advantages across the HRH categories examined.ConclusionWhilst South African salaries remain lower than their foreign counterparts by and large, the introduction and implementation of the OSD has made significant progress in reducing the gap between salaries of HRH in South Africa (SA) and the rest of the world. Given that the OSD has narrowed the gap between SA and overseas salaries whilst in the context of continued out migration of SA HRH, further research into push factors effecting migration needs to be undertaken.

Nonlinear adjustment to purchasing power parity in Latin American countries: the ADL test for threshold cointegration

This study applies a newly developed Autoregressive Distributed Lag (ADL) test for threshold cointegration proposed by Li and Lee (2010) to test the validity of long-run Purchasing Power Parity (PPP) for a sample of 15 Latin American countries from December 1994 to February 2010. Empirical results indicate that PPP holds true for most of the countries studied, with the exception of Brazil, Chile, Dominica, Haiti and Uruguay, and the long-run PPP adjustment process towards its equilibrium is asymmetric. Our results have important policy implications for these Latin American countries under study.

Nonlinear adjustment to purchasing power parity: the ADL test for threshold cointegration

This study applies a newly developed Autoregressive Distributed Lag (ADL) test for threshold cointegration, proposed by Li and Lee (2010) to test the validity of long-run Purchasing Power Parity (PPP) for a sample of East Asian countries from January 1986 to October 2009. Empirical results indicate that PPP holds true for all the countries studied, with the exception of Japan and Philippines, and the long-run PPP adjustment process towards its equilibrium is asymmetric. Our results have important policy implications for these East Asian countries under study.

Nonlinear Purchasing Power Parity under the Gold Standard

1. IntroductionRecent theoretical analysis of purchasing power deviations (see, e.g., Dumas 1992; Sercu, Uppal, and Van Hull 1995; and O'Connell and Wei 1997) demonstrates how transactions costs or the sunk costs of international arbitrage induce nonlinear adjustment of the real exchange rate to purchasing power parity (PPP). Globally mean-reverting this nonlinear process has the important property of exhibiting near unit root behavior for small deviations from PPP since small deviations from PPP are left uncorrected if they are not large enough to cover the transactions costs or the sunk costs of international arbitrage.A parametric nonlinear model, suggested by the theoretical literature, that captures the nonlinear adjustment process in aggregate data is the exponential smooth transition autoregression model (ESTAR) of Ozaki (1985). A smooth, rather than discrete, adjustment mechanism is motivated by the theoretical analysis of Dumas (1992). Also, as postulated by Terasvirta (1994) and demonstrated theoretically by Berka (2002), in aggregate data regime changes may be smooth, rather than discrete, given that heterogeneous agents do not act simultaneously even if they make dichotomous decisions.1 Recent empirical work (e.g., Michael, Nobay, and Peel 1997; Taylor, Peel, and Sarno 2001; Peel and Venetis 2002) has reported empirical results that suggest that the ESTAR model provides a parsimonious fit into a variety of data sets, particular for monthly data for the interwar and postwar floating period as well as for annual data spanning 200 years, as reported in Lothian and Taylor (1996). In addition, nonlinear impulse response functions derived from the ESTAR models show that although the speed of adjustment for small shocks around equilibrium will be highly persistent, larger shocks mean-revert much faster than the glacial rates previously reported for linear models (Rogoff 1996). In this respect, the ESTAR models provide some solution to the PPP puzzle outlined in Rogoff (1996).2The ESTAR model can also provide an explanation of why PPP deviations analyzed from a linear perspective appear to be described by either a nonstationary integrated I(1) process, or alternatively, described by fractional processes (see, e.g., Diebold, Husted, and Rush 1991). Taylor, Peel, and Sarno (2001), and Pippenger and Goering (1993) show that the Dickey-Fuller tests have low power against data simulated from an ESTAR model. Michael, Nobay, and Peel (1997) and Byers and Peel (2003) show that data that is generated from an ESTAR process can appear to exhibit the fractional property. That this would be the case was an early conjecture by Acosta and Granger (1995). Given that the ESTAR model has a theoretical rationale, whereas the fractional process is a relatively nonintuitive one, the fractional property might reasonably be interpreted as a misleading linear property of PPP deviations (Granger and Terasvirta 1999).Whereas the empirical work employing ESTAR models provides some explanation of the glacially slow adjustment speeds obtained in linear models, there is one aspect of the empirical work that is worthy of further attention. A second way of explaining the Rogoff puzzle, raised by Rogoff himself,3 is to relax the assumption that the equilibrium real exchange rate is a constant (see, e.g., Canzoneri, Cumby, and Diba 1996; and Chinn and Johnston 1996). Theoretical models, such as that of Balassa (1964) and Samuelson (1964), imply a nonconstant equilibrium in the real exchange rate if real productivity growth rates differ between countries.4 Nonlinear models that incorporate proxies for these effects are found to parsimoniously fit post-Bretton Woods data for the main real exchange rates (see Venetis, Paya, and Peel 2002; and Paya, Venetis, and Peel 2003). Naturally, models that ignore this effect may generate misleading speeds of PPP adjustment to shocks. In this regard, the empirical results of Hegwood and Papell (2002) for the Gold Standard period are particularly interesting. …

Further Evidence on PPP Adjustment Speeds: the Case of Effective Real Exchange Rates and the EMS*

AbstractTwo different approaches intend to resolve the ‘puzzling’ slow convergence to purchasing power parity (PPP) reported in the literature [see Rogoff (1996), Journal of Economic Literature, Vol. 34.] On the one hand, there are models that consider a non‐linear adjustment of real exchange rate to PPP induced by transaction costs. Such costs imply the presence of a certain transaction band where adjustment is too costly to be undertaken. On the other hand, there are models that relax the ‘classical’ PPP assumption of constant equilibrium real exchange rates. A prominent theory put together by Balassa (1964, Journal of Political Economy, Vol. 72) and Samuelson (1964 Review of Economics and Statistics, Vol. 46), the BS effect, suggests that a non‐constant real exchange rate equilibrium is induced by different productivity growth rates between countries. This paper reconciles those two approaches by considering an exponential smooth transition‐in‐deviation non‐linear adjustment mechanism towards non‐constant equilibrium real exchange rates within the EMS (European Monetary System) and effective rates. The equilibrium is proxied, in a theoretically appealing manner, using deterministic trends and the relative price of non‐tradables to proxy for BS effects. The empirical results provide further support for the hypothesis that real exchange rates are well described by symmetric, nonlinear processes. Furthermore, the half‐life of shocks in such models is found to be dramatically shorter than that obtained in linear models.