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Problems of Comparing the Standard of Living and the Per Capita Income of one Country to another

Inaccurate data and differences in computation method:

Many of the figures used in the computation of both the national income and population estimates are inaccurate. The method of computation varies from one country to another, which makes it difficult for the data or figure to be compared with each other.

Price Level:

Differences in the price level make it difficult to compare the standard of living of one county with another. A country with a high price level, due to inflation, will have higher national income estimates than one with a low price level. The high level will lead to a high cost of living which will lead to a low standard of living inspite of the high per capita income of the country.

Use of Different Currencies:

The use of different currencies by different countries poses a big problem in the comparison of their national income estimates and per capita income. The value of these currencies differ not only in their exchange rate, but also in their purchasing power. Socio-Political Stability: The socio-political situation changes from one country to another. A politically unstable government will spend most of its national income on the maintenance of political stability and less on economic activities. It is these economic activities that will lead to an improved standard of living for its citizens. This is dependent on whether the leadership is military or civilian.

Habits:

Differences in the consumption and expenditure habits of both the government and its citizens differ from one country to another. While one country spends irrationally on irrelevant needs, another is very rational and spends only on relevant needs.

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