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ICP 2005 Construction Prices: Are They Underestimated in Developing Countries?
Author(s) -
Breton Theodore R.,
García John J.
Publication year - 2016
Publication title -
review of income and wealth
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.024
H-Index - 57
eISSN - 1475-4991
pISSN - 0034-6586
DOI - 10.1111/roiw.12170
Subject(s) - apartment , economics , developing country , econometrics , engineering , economic growth , civil engineering
Construction prices are lower in developing countries in ICP 2005, which has raised these countries' capital/output ratio in P enn World Tables 7 and 8 and affected growth analyses. We estimate the C olombia/ U . S . price ratio for office and apartment buildings in 2005 as a test of the validity of the ICP 2005 methodology for estimating these prices. Our estimate of the C olombia/ U . S . price ratio is almost twice the ICP 2005 estimate. We confirm the validity of our results by estimating the cost of constructing office and apartment buildings using 2005 prices for construction materials, equipment, and labor in both countries.