A DIGITAL SERVICES APPROACH TO PPP: THE NETFLIX INDEX

Abstract

The famous Big Mac Index (BMI) is a popular example of global price differences for a non-tradable good. We analyze the prices of digital goods worldwide to check whether the Law of One Price (LOP) holds. We construct a Netflix Index, i.e., a price comparison of entertainment subscriptions. This Netflix Index compares the affordability of digital goods around the world. While the deviations between countries are smaller than for the BMI in most countries, there are still substantial price variations across countries. There is an empirical evidence that the LOP does not hold for digital goods.