Abstract

A fundamental question in economics is the standard of living across countries, by which we can mean the real earnings of the average person in a country (or real GDP per capita). Calculation of this concept requires detailed information on the prices in each country that consumers face when purchasing goods and services. The World Bank calculates the standard of living using prices laboriously collected from store visits. An alternative calculation of the standard living is made by academics in the Penn World Table (PWT), the most widely downloaded dataset in economics. We propose to use online prices, available from the Billion Prices project at MIT, to compute the standard of living across countries in the PWT. Demonstrating the feasibility of using online prices to compute the standard of living will be important for the PWT, for the World Bank, and for all the users of these data in economics and throughout the social sciences.