I am not sure how they are done but suffice to say there all sort of international prices of services and goods conducted by many people..i know two US proffesors with their own index(forgot their names)...IMF does it..WB does it..OECD does it...and even UN does it. They do it by conducting price surveys...say they collect prices of hair cuts in 10,000 places in kenya..and do an mean...so it comes down to say 50bob per hair cut (they can break it down to grades of haircut)...they go to Uganda...do the same...name it...and you have huge list of goods and services with average prices you'd expect in all countries.
Ultimately it compare EQUAL prices for equal good or services. So for instance an UN employee in Nairobi is paid salary equivalent to UN employee at New York HQ....but generally you get more bang for you money in developing countries..but there are things they cannot price like insecurity, road accidents, dirty streets, overflowing sewage, traffic jam...and there comes in other indexes like UNDP's HDI or even Happiness index.
Interesting. So it's basically a measure of how far the dollar will go in a specific country. It sounds like a good way to compare overall cost of living. Do they factor in quality of the service or products?
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