Cross-country income levels over time: did the developing world suddenly become much richer?

The latest global survey on relative prices and income levels showed revisions to income levels that were larger in lower-income countries, thereby shifting the world income distribution. The aim of this paper is to establish whether changes in measurement methodology and price sampling methods between the latest price survey for 2011 and the previous survey for 2005 can explain these large differences. We construct a counterfactual set of relative prices for 2005 that harmonizes measurement and we find that the systematic differences in income levels are substantially reduced or even eliminated, implying that international income inequality had been overstated.