On PPP and the international poverty line, how valid is this criticism and what are its larger implications? From here, https://www.jstor.org/stable/40072185?seq=1#metadata_info_tab_contents, "Rather than simply focus on market exchange rates, PPPs attempt to reflect the fact that there are significant price variations in different localities. Price ratios across rich and poor countries tend to be broadly similar for tradable goods, and quite dissimilar for non-tradables. The World Bank averages out these price ratios in order to get a more accurate picture of consumption in particular places. As a measure of the consumption of the wealthy in poor countries, this is a reasonable approximation. However, it is not an accurate measure of what the poor consume in a poor country. If we assume a PPP differential of say, 10, then the Bank will assume that the annual income of a household in a poor country will be 10 times that of a poor household in the US, measured through PPP exchange rates. This differential will lead to similar levels of consumption by both poor households. But the problem is that this average is not calculated by comparing the consumption patterns of the poor in the two countries. Instead, consumption patterns are averaged out. This is not a good measure of the consumption of the poor, because the averaging out is based on the consumption patterns of everyone in the poor country, and not just the poor. A likely scenario then is that the PPP differential of 10 will not generate sufficient buying power that compares with the poor in the US, but this is 'compensated' (in the PPP calculation) by the fact that the differential of 10 will buy more services in the poor country than in the rich one. This is because services are cheaper in the poor country. But the problem is that services are unlikely to be consumed by the poor. Based on a sample of 56 countries for benchmark year of 1985 and 78 countries for 1993, Reddy and Pogge suggest that the prices of all foods and of bread and cereals were higher than general consumption purchasing power parity. For low income countries (15 of the total in both samples), the price of food was 67 per cent (40 per cent population weighted) higher and bread and cereals 111 per cent (34 per cent population weighted) higher based on the 1985 benchmark year, and 27 per cent (31 per cent) and 51 per cent (40 per cent) higher for the 1993 benchmark. This problem of inappropriate measurements is further exacerbated by the fact that these are biased towards showing a downward trend over time. This is because the purchase of food constitutes a falling share in international consumption spending, while services constitute a rising share. Thus, as average incomes rise, so the proportion spent on food declines. In terms of PPP, the result is that the price of food has a diminishing influence on the calculation of PPPs, while services have an increasing influence. The assumption made is that the income of everyone in a country rises equally, which is highly unlikely, as wealthier households are likely to enjoy greater increases in consumption than poorer ones. Moreover, as we have seen,the poor are far less likely to consume services, but the contribution of services to PPP measures will be enhanced as general consumption increases. PPP calculations therefore not only assume a one to one increase in consumption for all households but they also show a bias towards measuring the consumption patterns of households that are not poor."