International Comparison of Cost for the Construction Sector: Purchasing Power Parity
Publication: Journal of Construction Engineering and Management
Volume 131, Issue 2
Abstract
The importance of the construction sector in national economies around the globe and the global nature of the industry require a prudent international comparison of construction costs. From the view of international construction ventures, cost comparisons have generally been accomplished using published currency exchange rates. Global organizations dealing with development aid and the comparison of the gross domestic product (GDP) of nations have used an approach that has its roots in established econometric theories. This approach is based on the Casselian purchasing power parity (PPP) doctrine that essentially conducts the comparison based on the local purchasing power of currencies, as opposed to exchange rates. The World Bank, which conducts the GDP comparison, uses the PPP-based approach to compare construction sector output. This paper provides an overview of the background and application of PPP and its use for international cost comparisons conducted for various nations. Methods currently used for construction cost comparisons are reviewed. A critical review of domestic construction cost comparison approaches is provided with the intent to identify the key differences between temporal and spatial comparisons. Case studies of construction cost factors are used to demonstrate the importance of PPP-based cost comparisons for construction economics.
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Acknowledgments
The writers acknowledge Mr. Yonas Biru, Senior Economist with the Development Data Group at the World Bank for his guidance in issues related to econometrics. This paper resulted from research supported in part by the World Bank. Additional support was provided by National Science Foundation (NSF) Grant No. EEC 0097836. Opinions expressed here are those of the authors and not necessarily of the World Bank or NSF.
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Information & Authors
Information
Published In
Journal of Construction Engineering and Management
Volume 131 • Issue 2 • February 2005
Pages: 160 - 167
Copyright
© 2004 ASCE.
History
Received: Aug 5, 2002
Accepted: Sep 25, 2003
Published online: Feb 1, 2005
Published in print: Feb 2005
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