Purchasing Power Parity Exchange Rates Research Articles

Technical comment on "Fairness considerations in global mitigation investments".

In an otherwise excellent analysis of fair regional shares of global mitigation investments, Pachauri et al. (Policy Forum, 9 December 2022, p. 1057) dramatically overestimate developing countries' 'capability' to invest by estimating GDP using purchasing power parity exchange rates. Since internationally sourced investment goods must be paid for at market exchange rates, capability-based interregional finance flows should be vastly larger.

Economic costs of the Russia‐Ukraine war

AbstractThe unprovoked and brutal invasion of Ukraine by Russia on 24 February 2022 is imposing a terrible human cost. In this paper, we use the National Institute Global Econometric Model (NiGEM) to quantify the impact of the war on the global economy. The war represents a massive cost, equivalent to 1% of global GDP in 2022, or about $1.5 trillion valued at purchasing power parity exchange rates (PPP), compared with our GDP forecast made at the beginning of 2022. Europe is the region affected most, given trade links its proximity to Ukraine and Russia and its reliance on energy and food supplies from those countries. GDP in Europe is expected to shrink by more than 1% in 2022 compared with our forecast at the beginning of 2022. In Western Europe, Germany will be worst affected, followed by France and Italy. GDP in ‘Developing Europe’, where Ukraine is the largest representative, is expected to shrink by 30%. The war will also add about 2% to global inflation in 2022 and 1% in 2023, compared with NIESR's inflation projection at the beginning of 2022.

The economic and social costs of visual impairment and blindness in India.

To provide a current estimate of the economic and social costs (or welfare costs) of visual impairment and blindness in India. Using evidence from the recently conducted Blindness and Visual Impairment Survey across India, the Lancet Global Health Commission on Global Eye Health and other sources, we developed an economic model that estimates the costs of reduced employment, elevated mortality risk, education loss for children, productivity loss in employment, welfare loss for the unemployed, and caregiver costs associated with moderate and severe visual impairment (MSVI) and blindness. Probabilistic sensitivity analyses were also conducted by varying key parameters simultaneously. The costs of MSVI and blindness in India in 2019 are estimated at INR 1,158 billion (range: INR 947-1,427 billion) or $54.4 billion at purchasing power parity exchange rates (range: $44.5-67.0 billion), accounting for all six cost streams. The largest cost was for the loss of employment, whereas the the second largest cost was for caregiver time. A more conservative estimate focusing only on employment loss and elevated mortality risk yielded a cost of INR 504 billion (range: INR 348-621 billion) or $23.7 billion (range: $16.3-29.2 billion). Poor eye health imposes a non-trivial recurring cost to the Indian economy equivalent to 0.47% to 0.70% of GDP in the primary scenario, a substantial constraint on the country's growth aspirations. Furthermore, the absolute costs of poor eye health will increase over time as India ages and becomes wealthier unless further progress is made in reducing the prevalence of MSVI and blindness.

Economic evaluation of pan-genotypic generic direct-acting antiviral regimens for treatment of chronic hepatitis C in Iran: a cost-effectiveness study

IntroductionLow-cost generic direct-acting antiviral (DAA) regimens for treatment of hepatitis C virus (HCV) are available in several low-income/middle-income countries, important for treatment scale-up. This study evaluated the cost-effectiveness of genotype-dependent...

Purchasing power parities and the Dollar-A-Day approach: An unstable relationship

We show that the Dollar-A-Day methodology in global poverty measurement provides inconsistent International Poverty Line (iPL) solutions when a complete set of consistency criteria in the iPL definition is used. This article illustrates that minor fluctuations in purchasing power parity exchange rates can yield inconsistent iPLs. We find a rate of inconsistency of 46.1% and we conclude that this is a worrisome attribute of the method.

Global poverty: A first estimation of its uncertainty

The dollar-a-day method, applied in monitoring the UN’s development goals against poverty, provides no confidence interval for the official figures of global poverty reduction, a practice that does not allow statistical testing. Using Monte Carlo micro-simulations we construct confidence intervals that reflect the error introduced by the process of determining the International Poverty Line, as well as the uncertainty of the involved Purchasing Power Parity exchange rates. These estimates identify a reduction of 5.19% between 1990 and 2015 at 95% confidence level, in stark contrast with the remarkable 73% reduction of global poverty reported in the World Bank official statistics published on September 18, 2018. At the same time, MDG1 obtains with a 80% confidence level. The cost-of-basic-needs method paints a more promising picture identifying a 35.71% reduction at 95% confidence level, while the confidence level at which poverty in 2015 was half of 1990 stands at 46%. We conclude that the derivation method of the international poverty line introduces high levels of uncertainty in the estimates.

Cost-effectiveness randomized clinical trial on the effect of photobiomodulation therapy for prevention of radiotherapy-induced severe oral mucositis in a Brazilian cancer hospital setting.

This study aimed to assess the cost-effectiveness of photobiomodulation therapy (PBMT) in association with a Preventive Oral Care Program (POCP) compared with POCP alone in the treatment of radiotherapy (RT)-induced oral mucositis (OM). The cost-effectiveness was evaluated from the health provider perspective and conducted alongside a randomized, double-blind clinical trial. Participants were randomly assigned to either PBMT (n = 25) or control (n = 23) group. The PBMT group participants received PBMT associated with POCP. In the control group, patients were submitted to POCP alone. Costs were identified, quantified, and valued through observation and consultation of the hospital's financial sector database and estimated in Brazilian real and converted to international dollars using the purchasing power parity exchange rate. The incremental cost-effectiveness ratio (ICER) was estimated by considering the prevention of severe OM, interruption of RT, and oral health-related quality of life (OHRQoL) scores, measured by the OHIP-14 and patient-reported OM symptoms scale (PROMS). The incremental cost of PBMT was $857.35, and the cost per session was $25.69. The ICER was $ 2867.39 to avoid one case of severe OM and $ 2756.75 to prevent one interruption in RT due to OM. ICER to reduce 1 point in OHIP-14 and PROMS scores were $170.79 and $31.75, respectively. PBMT is more cost-effective than POCP alone in preventing severe OM, worsening of the OHRQoL, and RT interruptions. PBMT is a promising therapy, especially to avoid interruptions in oncological treatment. ReBEC-RBR-5h4y4n.

Exchange rate and long-run price relationship in 19 selected European and LDCs

PurposeThis study aims to make a comparative study of the applicability of the purchasing power parity (PPP) in selected less developing countries (LDCs) on one hand and European countries on the other hand.Design/methodology/approachThe research design is empirical and ex post facto. This study uses an assortment of co-integration tests and error correction representation. The chosen approach allows for the consideration of long-run elasticities and the dynamics of the short-run adjustment of exchange rates to changes in domestic and foreign prices. Monthly data are used for the period 1980:1 through 2015:12 (i.e. 432 observations).FindingsResults from long-run co-integration analysis, short-run error correction models and persistence profile analysis overwhelmingly confirm the validity of PPP in these two sets of countries regardless the disparity in their relative exchange rate and price characteristics.Research limitations/implicationsCuriously, several of these empirical studies and still many more, have focused their attention on the experiences of industrialized countries, with a few investigations devoted to LDCs. The evidence is even scarcer in Africa. Clearly, the acceptance of any hypothesis as a credible explanation of economic reality hinges on the robustness of the hypothesis across countries with different economic and institutional frameworks.Practical implicationsKnowledge of the extent to which exchange rate and relative prices can be linked in the long run is important for the design and management of inflation and the implementation of monetary policy. For instance, policy actions aimed at stabilizing the domestic economy can obtain results that are, at best, uncertain in the absence of correct characterization of the PPP dynamics. Moreover, structural and macroeconomic adjustment programs implemented in these countries to achieve economic growth and external competitiveness could be unsuccessful if flawed estimates of PPP exchange rates are retained.Originality/valueSeveral empirical studies have been done to prove the validity or otherwise of the PPP. Unlike prior authors, this study makes a comparative study of the applicability of the PPP in selected LDC on one hand and European countries.

PSS61 - Comparative Analysis of Indirect Costs Associated with Chronic Spontaneous/Idiopathic Urticaria-Results From The Assure-Csu Study In 7 Countries

The ASSURE-CSU study is an observational, non-interventional, multinational, and multicentre study of patients with chronic spontaneous/idiopathic urticaria (CSU/CIU) in Canada, France, Germany, Italy, Spain, the Netherlands, and the United Kingdom (UK). The current research reports the comparative indirect costs in CSU patients across countries. Patients with diagnosed CSU who were symptomatic despite treatment were recruited. Employed patients (56.5%) completed the Work Productivity and Activity Impairment (WPAI) questionnaire. Indirect costs due to CSU were calculated for absenteeism (work time missed), presenteeism (impairment while working), and overall work productivity loss (algorithm incorporating absenteeism and presenteeism) based on a national average 4-week salary (from local national statistics). To enable cost comparison across countries, purchasing power parity (PPP) approach was used. Mean (SD) costs in each country currency were divided by the corresponding PPP exchange rate using published exchange rates available from the Organisation for Economic Co-operation and Development for 2014. Mean (SD) cost for absenteeism over 4 weeks in each country was: Italy [PPP$45.4 (120.5)], Netherlands [PPP$122.0 (470.9)], Spain [PPP$139.8 (414.2)], France [PPP$168.4 (586.4)], Canada [PPP$186.7 (373.5)], UK [PPP$294.9 (687.7)] and Germany [PPP$313.8 (844.8)]. Country-specific mean presenteeism costs were: France [PPP$544.5 (583.2)], Italy [PPP$588.3 (562.8)], Spain [PPP$904.6 (965.0)], Canada [PPP$928.5 (818.3)], UK [PPP$980.9 (891.1)], Netherlands [PPP$1056.3 (1351.0)], and Germany [PPP$1180.0 (1083.9)]. Overall work productivity loss costs were driven primarily by the cost of presenteeism, and ranged from PPP$544.8 (603.2) in France to PPP$1287.4 (1123.8) in Germany. The lower indirect costs in France and Italy were driven by lower reported presenteeism, and in Italy, lower absenteeism. CSU impacts patients’ capacity to work and this is reflected in substantial societal costs. Results suggest a significant societal and economic burden associated with inadequately-controlled CSU, and strengthen the need for effective treatment in this population.

The Cost of Psoriasis and Psoriatic Arthritis in 5 European Countries: A Systematic Review

IntroductionWhile the introduction of biologics has improved the quality of life of patients with psoriasis and psoriatic arthritis, it may have increased the economic burden of these diseases. ObjectiveTo perform a systematic review of studies on the costs associated with managing and treating psoriasis and psoriatic arthritis in 5 European countries: Germany, Spain, France, Italy, and the United Kingdom. MethodsWe undertook a systematic review of the literature (up to May 2015) using the MEDLINE and EMBASE databases. The methodological quality of the studies identified was evaluated using the Consolidated Health Economic Evaluation Reporting Standards checklist. We considered both direct costs (medical and nonmedical) and indirect costs, adjusted for country-specific inflation and converted to international dollars using purchasing power parity exchange rates for 2015 ($US PPP). ResultsThe search retrieved 775 studies; 68.3% analyzed psoriasis and 31.7% analyzed psoriatic arthritis. The total annual cost per patient ranged from US $2,077 to US $13,132 PPP for psoriasis and from US $10,924 to US $17,050 PPP for psoriatic arthritis. Direct costs were the largest component of total expenditure in both diseases. The severity of these diseases was associated with higher costs. The introduction of biologics led to a 3-fold to 5-fold increase in direct costs, and consequently to an increase in total costs. ConclusionsWe have analyzed the economic burden of psoriasis and psoriatic arthritis and shown that costs increase with the treatment and management of more severe disease and the use of biologics.

Coste de la psoriasis y artritis psoriásica en cinco países de Europa: una revisión sistemática

IntroductionWhile the introduction of biologics has improved the quality of life of patients with psoriasis and psoriatic arthritis, it may have increased the economic burden of these diseases. ObjectiveTo perform a systematic review of studies on the costs associated with managing and treating psoriasis and psoriatic arthritis in 5 European countries: Germany, Spain, France, Italy, and the United Kingdom. MethodsWe undertook a systematic review of the literature (up to May 2015) using the MEDLINE and EMBASE databases. The methodological quality of the studies identified was evaluated using the Consolidated Health Economic Evaluation Reporting Standards checklist. We considered both direct costs (medical and nonmedical) and indirect costs, adjusted for country-specific inflation and converted to international dollars using purchasing power parity exchange rates for 2015 ($US PPP). ResultsThe search retrieved 775 studies; 68.3% analyzed psoriasis and 31.7% analyzed psoriatic arthritis. The total annual cost per patient ranged from US $2,077 to US $13,132 PPP for psoriasis and from US $10,924 to US $17,050 PPP for psoriatic arthritis. Direct costs were the largest component of total expenditure in both diseases. The severity of these diseases was associated with higher costs. The introduction of biologics led to a 3-fold to 5-fold increase in direct costs, and consequently to an increase in total costs. ConclusionsWe have analyzed the economic burden of psoriasis and psoriatic arthritis and shown that costs increase with the treatment and management of more severe disease and the use of biologics.

Modelling the impact of raising tobacco taxes on public health and finance.

ObjectiveTo investigate the potential for tobacco tax to contribute to the 2030 agenda for sustainable development by reducing tobacco use, saving lives and generating tax revenues.MethodsA model of the global cigarette market in 2014 – developed using data for 181 countries – was used to quantify the impact of raising cigarette excise in each country by one international dollar (I$) per 20-cigarette pack. All currencies were converted into I$ using purchasing power parity exchange rates. The results were summarized by income group and region.FindingsAccording to our model, the tax increase would lead the mean retail price of cigarettes to increase by 42% – from 3.20 to 4.55 I$ per 20-cigarette pack. The prevalence of daily smoking would fall by 9% – from 14.1% to 12.9% of adults – resulting in 66 million fewer smokers and 15 million fewer smoking-attributable deaths among the adults who were alive in 2014. Cigarette excise revenue would increase by 47% – from 402 billion to 593 billion I$ – giving an extra 190 billion I$s in revenue. This, in turn, could help create the fiscal space required to finance development priorities. For example, if the extra revenue was allocated to health budgets, public expenditure on health could increase by 4% globally.ConclusionTobacco taxation can prevent millions of smoking-attributable deaths throughout the world and contribute to achieving the sustainable development goals. There is also potential for tobacco taxation to create the fiscal space needed to finance development, particularly in low- and middle-income countries.

The Rising Tide of Absolute Global Income Inequality During 1850–2010: Is It Driven by Inequality Within or Between Countries?

This paper is the first to decompose absolute global income inequality into its within-country and between-country component. The results show a continuous increase of absolute global inequality during 1850–2010, which can be separated into three distinct phases: (1) between 1850 and 1929, within-country inequality explained up to 76 % of absolute global inequality, yet the growth rates of within- and between-country inequality were very similar; (2) a sharp increase in the importance of between-country inequality occurred during the 1929–1950 period, which was followed by a period during which the within- and between-country components were approximately equally relevant; and (3) after 1985, the growth in absolute global inequality was driven primarily by the accelerated growth of within-country income differences. Currently, within-country inequality explains 70 % of absolute global market inequality, a figure close to that of the year 1850. Additional findings include that absolute income convergence between countries took place after 2005, that it is possible to reduce absolute inequality and to grow simultaneously, and that recently within-country net inequality has grown faster than market inequality. The main findings are preserved when different absolute decomposable inequality measures, sample sizes, and purchasing power parity exchange rates are used.

Abstract 16853: Dietary Improvements and the Preventable Cost of Cardiovascular Disease: Evidence From the Literature

Introduction: Cardiovascular diseases (CVD) risk has been linked to dietary components in many studies, but the associated reduction in CVD healthcare costs with dietary improvements has not been systematically evaluated. Hypothesis: CVD healthcare cost savings associated with an improvement in dietary metrics are substantial. Methods: We searched PubMed, Embase, CINAHL and ABI/Inform to identify population-based studies published between January 1990 and December 2014 on CVD healthcare costs related to a dietary component. The selected dietary components, in accordance with those identified by the American Heart Association in their 2010 Strategic Impact goals, included salt/sodium, sugar-sweetened beverages, fruits and vegetables, fish/omega-3 fatty acids, whole grains/fiber. Other selected dietary components, based on AHA’s secondary dietary metrics, were nuts, processed meat and saturated fat. For each dietary component, we evaluated the CVD healthcare cost savings if the current consumption level were to be changed. Results: In 329 articles obtained, 15 studies evaluated the healthcare costs associated with one or more of dietary components: salt/sodium (n=12); fruit and vegetables (n=1); meat (n=1); saturated fat (n=3). The majority of studies (n=11) used an incidence-based approach, and the remaining were prevalence-based analyses. Adjusting the costs to 2013 US dollar values using consumer price index and purchasing power parity exchange rate, reducing average sodium intake by 1.2 g/day could save $1794 per person per year in the United Kingdom. Reducing individual sodium intake to 2.3 g/day could save $1955 per person in the United States. Increasing consumption of fruits and vegetables from <0.5 cup / day to more than 1.5 cups / day could save $1481 per person in the United States. Conclusions: In conclusion, reducing sodium intake and increasing consumption of fruits and vegetables could substantially reduce CVD costs. Few studies were available on the cost savings associated with dietary components for cardiovascular health. These results suggest a need for economic studies using high-quality cost information and the most recent evidence to predict long-term cost savings.

What Determines Purchasing Power Parity Exchange Rates?

In an effort to provide a better understanding of the large variation in price levels between countries, we report on a cross-country analysis of national price levels, using Purchasing Power Parity (PPP) data on 168 economies from the most recent 2011 round of the International Comparison Program (ICP). PPPs are used for many purposes, including to set international poverty lines and allocate IMF quotas. The well-known Balassa-Samuelson income effect is not the only factor affecting PPPs, particularly for low- and middle income countries. Structural and policy factors make a difference. Small island states are relatively costly for their income level as are sparsely populated countries. Countries with large subsidy programs – as measured by fuel subsidies – tend to have lower price levels than predicted on the basis of income. More open labor policies – as measured by a higher share of migrants in the labor force – are associated with lower price levels in higher-income countries. The proposition that very poor governance is associated with both low income and high prices receives some modest support. Aid inflows and a negative current account balance are correlated with higher price levels (the latter less strongly), but FDI and remittances are not. We also observe a strong association between inequality and higher price levels, which provides some support for the proposition that the ICP may over-weight globally comparable goods. Our results confirm the tendency for African countries to be more expensive than countries with similar incomes in other parts of the world. We fail to fully explain this phenomenon but offer a number of explanations that together could account for it, including low agricultural productivity. Finally, we confirm the relationship between low PPP price levels and greater competitiveness in manufactures, especially for low and middle-income countries.

Aggregation and internalisation of electricity externalities in South Africa

Energy-environmental impacts associated with non-renewable electricity generation have attained critical importance in South Africa. These impacts are quantified in order to obtain a monetary cost relative to local electricity prices. The methodology used to perform the analysis is the Impact Pathway Approach. Numerous energy-environmental external impacts have been evaluated in this study. The primary externality contributors were found to be GHG (green-house gas) emissions and public health effects from coal combustion. Other minor but important contributors to externalities are also identified and mentioned within the paper. Aggregated central externality costs were found to range from 5.86 to 35.36 SA c/kWh (1.31–7.95 US c/kWh), with central externalities estimates at 13.43 SA c/kWh (3.02 US c/kWh). These central estimates were found to be 68.5% of average electricity prices during the year 2008. Conversion of externality costs from South African currency to US currency has been made with purchasing power parity exchange rates for the year 2008. This study provides sufficient methodological parity for countries with similar electricity generation backgrounds in Southern Africa and Africa as well as other developing countries, considering South Africa generates roughly 45% of the electricity on the African continent.

Trying to Understand the PPPs in ICP 2011: Why Are the Results So Different?

Purchasing power parity exchange rates, or PPPs, are price indexes that summarize prices in each country relative to a numeraire country, typically the United States. These numbers are used to compare living standards across countries, by academics in studies of economic growth, particularly through the Penn World Table, by the World Bank to construct measures of global poverty, by the European Union to redistribute resources, and by the international development community to draw attention to discrepancies between rich and poor countries. The International Comparison Program (ICP) collects the detailed prices on which these indexes are based on an irregular basis. In 2014, the ICP published PPPs from the 2011 round that are sharply different from those that were expected from extrapolation of the previous round, ICP 2005. These discrepancies will eventually have important implications for the Penn World Table, and for international comparisons of living standards given that the PPPs are used to convert countries’ national accounts—GDP and consumption, for example—from local currency to common currency units (international dollars.) The world according to ICP 2011 looks markedly more equal than the world according to ICP 2005. This paper investigates why this happened. We identify a likely source of the problem in the way that the regions of the ICP were linked in 2005. We use two different methods for measuring the size of the effect. Both suggest that the 2005 PPPs for consumption for countries in Asia (excluding Japan), Western Asia, and Africa were overstated relative to the United States by between 18 to 26 percent. Per capita consumption in international dollars of these countries was therefore too low in 2005 and more likely to be accurately estimated in 2011. (JEL E31, F31, I31, I32, O11, O19)

Agenesis of maxillary lateral incisor and tooth replacement: cost-effectiveness of different treatment alternatives.

To evaluate the long-term cost-effectiveness of five treatment alternatives for maxillary lateral incisor agenesis where space maintenance and tooth replacement are indicated. The following treatment modalities were considered: single-tooth implant-supported crown, resin-bonded fixed partial denture (FPD), cantilever FPD, full-coverage FPD, and autotransplantation. The cost-effectiveness for each treatment modality was determined as the ratio of the outcome of each modality divided by the cost. Direct costs, clinical and laboratory, were calculated based on national fee schedules and converted to international dollars using purchasing power parity exchange rates. Outcomes were based on the most recently published long-term (10-year) survival rates. Sensitivity analyses were carried out, testing the robustness of the cost-effectiveness analysis. The five treatment modalities ranked in the following order from most to least cost-effective: autotransplantation, cantilever FPDs, resin-bonded FPDs, single-tooth implants and implant-supported crowns, and full-coverage FPDs. Sensitivity analysis illustrated that the cost-effectiveness analysis was reliable in identifying autotransplantation as the most and full-coverage FPDs as the least cost-effective treatment modalities. When replacing a missing maxillary lateral incisor, the most costeffective, long-term treatment modality is autotransplantation, whereas the least cost-effective is full-coverage FPDs. However, factors such as patient age, the state of the dentition, occlusion, and tooth conservation should also influence the choice of restoration.

Costs of Medically Attended Acute Gastrointestinal Infections: The Polish Prospective Healthcare Utilization Survey

ObjectivesThe burden of acute gastrointestinal infections (AGIs) on the society has not been well studied in Central European countries, which prevents the implementation of effective, targeted public health interventions. MethodsWe investigated patients of 11 randomly selected general practices and 8 hospital units. Each patient meeting the international AGI case definition criteria was interviewed on costs incurred related to the use of health care resources. Follow-up interview with consenting patients was conducted 2 to 4 weeks after the general practitioner (GP) visit or discharge from hospital, collecting information on self-medication costs and indirect costs. Costs were recalculated to US dollars by using the purchasing power parity exchange rate for Poland. ResultsWeighting the inpatient costs by age-specific probability of hospital referral by GPs, the societal cost of a medically attended AGI case was estimated to be US $168. The main cost drivers of direct medical costs were cost of hospital bed days (US $28), cost of outpatient pharmacotherapy (US $20), and cost of GP consultation (US $10). Patients covered only the cost of outpatient pharmacotherapy. Considering the AGI population GP consultation rate, the age-adjusted societal cost of medically attended AGI episodes was estimated at US $2222 million, of which 53% was attributable to indirect costs. ConclusionsEven though AGIs generate a low cost for individuals, they place a high burden on the society, attributed mostly to indirect costs. Higher resources could be allocated to the prevention and control of AGIs.

Does Poor Mean Cheap? A Comparative Look at Africa's Industrial Labor Costs

Africa’s industrial progress has been disappointing. With the exception of South African auto components and garments, both of which have benefited from special incentives, Africa exports almost no manufactured goods that are not based on the processing of raw materials. Despite considerable rhetoric on the need to develop manufacturing as well as support by donors, what limited progress has been made has often been uneven and isolated. Much of Africa’s manufacturing sector is still characterized by a significant economic dualism between a large number of small-scale enterprises in the informal sector and a handful of more efficient large-scale operations in the formal sector.Following on from previous research on external costs, this paper compares labor costs and productivity in selected African countries relative to comparatives using data for 25 countries from the World Bank’s Enterprise Surveys. We conclude that industrial labor costs are far higher in Africa than one might expect, given levels of Gross Domestic Product (GDP) per capita. Part of this is an “enclave effect”. Both labor costs and labor productivity are far higher in Africa, relative to GDP per capita, than in comparable countries. Another part reflects a steeper labor cost curve. As firms are larger and more productive, their labor costs increase more in Africa than elsewhere. But there is still a sizable residual “Africa effect” after controlling such factors. We cannot test rigorously for the reasons behind these results, but can consider some plausible explanations. We also consider how Africa’s distinctive pattern, in terms of purchasing power parity exchange rates, could affect the results.The paper concludes with some implications for policy. Certainly there is an urgent need to reduce external costs through focused investments (power), as well as a general improvement in the business climate. However, with the exception of a few countries like Ethiopia, it is not clear that Africa’s low-income level automatically translates into a comparative advantage in low-wage basic manufacturing. The paper argues that it is more likely to reside in sectors closely linked with the rich and varied natural resource endowments of the countries, whether supplying or processing industries.