Why is GDP per capita (PPP US$) used over GDP per capita (US$) in the HDI?
The human development index (HDI) attempts to make an assessment of 177 very diverse countries and areas, with very different price levels. To compare economic statistics across countries, the data must first be converted into a common currency. Unlike conventional exchange rates, PPP (Purchasing Power Parity) rates of exchange allow this conversion to take account of price differences between countries. GDP per capita (PPP US$) accounts for price differences between countries and therefore better reflects people’s living standards. In theory, at the PPP rate, 1 PPP dollar has the same purchasing power in the domestic economy of a country as 1 US dollar has in the US economy. For further discussion on the use of PPP, see Box 2, p.135, in the Note on statistics in the Human Development Report 2001 (The why’s and wherefore’s of purchasing power parities).
