Living Standards Poverty 中国经济发展与转型（英文版） 教学课件.ppt

* * * * * * Chinese Modern Economic History Living Standards and Poverty Naughton, Chapter 9 Chinese Modern Economic History PPP review - A family of four people in the US, with an income per year of $22,000, about 12,000 yuan per month, or 144,000 yuan per year, is considered poor. What does that mean? How do we compare incomes in different countries, particularly low incomes? The exchange rate is one way. Right now, $1 = 6.28 yuan But the exchange rate is not a good measure, for several reasons. The rate can be manipulated - a country can work to keep its rate low, to stimulate exports, which makes imports more expensive. Does that matter to poor people? Maybe, maybe not. Even if the exchange rate is freely floating between two countries, it reflects a market evaluation of traded values, which may not apply to the goods that poor people use - food, shelter, clothing, health care. And the exchange rate takes inflation into account, which may not be the same inflation affecting poor people. Chinese Modern Economic History We considered Purchasing Power Parity in Naughton Chapter 6 and in Mankiw. Let’s look at it again. We want to compare living costs between two countries. What can it mean to earn 12,000 yuan a month and be poor? We want to compare a “basket of goods” that a person in both countries might purchase- food, shelter, clothes. Of course, people in different countries eat different things, wear different things, live in different kinds of places. And within one nation, standards vary a lot. Houses in Dalian have heat in the winter. So do university dorms. But the collected data is meant to adjust for such differences. The PPP is not exact, but an indication of relative costs. If there are products that are close substitutes in both countries, we can look at their relative prices to get some good data on PPP. Hence, the Big Mac Index. Chinese Modern Economic History Chinese Modern