do some countries really have lower living costs?

Question

Many countries have very low nominal incomes. For example, India has an GDP per capita of $705, but it's PPP(purchasing power parity) is $3,320. Since their nominal income results in a PPP income of almost 5 times as much, does that mean that their money goes further? If I took $50,000 to India, would my income be almost 5 times as much there? Do televisions and computers cost less there? How about building costs for a house? Clothes? I am trying to figure out an apples to apples comparison of products and services.

Answer 1

Sure, the money goes further.

A gallon of milk in India is less than a gallon of milk (adjusted for Ex Rate) in NYC.

However, the cost of living is higher because more people WANT to live in NYC.

Many people in the midwest and south (in the US) always shriek that cost of living is lower.

Sure, because there isn't quite the demand for housing, food, and services that cities like Chicago and NYC have. Some cities, like Atlanta and Houston, will soon catch up, so they have a point.

But for the most part, "cost of living" exists because more people want to live in the expensive place.

Answer 2

You would not be able to magically get 5 times as much stuff, comparing apples to apples. What is truly cheaper in such a country is one hour of labor. BUT ... one hour of labor is also far less productive on average across all potential products. One hour of labor in India does not produce something that is equal to one hours' labor in the US -- where more capital and more sophisticated techniques are used, for the most part.

A service or good that is labor intensive but not complex might indeed be 1/5 as expensive and still as good, in India. For example maid service, cooking, gardening, janitorial services.

But a Honda civic, a notebook computer, a plasma TV, anything requiring complex design and capital-intensive manufacturing -- these will not be 1/5 the cost just because you're in India; many such things will have to be imported from the US or Japan anyway, and so can't be much cheaper.

PPP is an attempt to make some sense of these issues, and to explain why someone in China making only $2000 a year is not living in dire poverty, as a New Yorker might expect. BUT -- you have to use caution, PPP does not actually mean that all products and services are cheaper as it might suggest. A pound of copper or a barrel of oil is going to cost pretty much the same the world over; if not, you could become a billionaire exploiting that fact.

Answer 3

Countries will lower GDP have also low PPP because they don't spent as much like in other countries. High GDP growth affects the consumption pattern of the people. People spend more as income increases which increases the demand. With fixed supply, the price of the good increases in the market. In other words, countries with high GDP have also high inflation rate.

Lower GDP or lower PPP does not necessarily follow that local produce are cheaper than abroad. It is based, however, by the productivity of the country's resources. It is also based on the country's trade policy. You can check whether they impose tariff rate on apples. In comparing the price of the goods, one must consider the freight cost (CIF) and tariff rates.

Answer 4

If India's PPP is $3.320,00, that means that one can purchase services and goods in India for $705 that would cost $3.320,00 in the US. Services in the US are much more expensive and goods might, generally, cost the same. Therefore, if you take $50.000 to India, yes, your purchasing power will be equivalent to approximately $250.000,00 in the U.S.

Answer 5

My country Indonesia has GDP almost the same with India. I live in NYC now. I pay 900$ for my studio apartment/month and i think i can rent a 5 bedrooms house in Jakarta with 900$/month. For $500.000 small house in NYC, we can build a 75 feet x 75 feet good quality house in Jakarta. Computer and television almost the same with NYC. So laptop is quite luxury thing in my country since we have low nominal income and the price is almost the same with US. Food is cheaper.... even mc.donald is cheaper in my country. Food price in NYC is +/- 4 times in my country.Overall Clothes in my country is cheaper. But for some well known brand.... i think it almost the same with here. Let say versace, prada etc.

Answer 6

Everything made locally is cheaper. That includes electronics; even if there is no local production, chinese make lower-quality unbranded versions of it for third-world markets.

Labor-intensive services are super-cheap. Such "luxuries" as house-maids, taylored clothing, chauffeurs are available to middle class.

Imported food and western-standard housing is more expensive than in the West so. So these places are often very expensive for a business traveller.

Answer 7

often, the main inexpensive places to stay are the main costly to holiday. they have few airports, roads, and so on. as quickly as you get there, living is low-value-in case you have the properly suited variety of foreign places money. Southeast Asia is area #a million, Africa is area #2, yet verify first with a holiday agent to establish the area is risk-free to holiday - Africa has assorted volatile places on the 2d. Get a holiday agent and a instruction manual, if conceivable. a lot of those international locations are thoroughly corrupt, and you should be in risk of attack, or theft, if not arranged.