Why do developed countries tend to have a higher cost of living than developing countries?

Answer 1

You are thinking about Purchasing Power Parity(PPP)or the law of one price. that is, the Price of a loaf of Bread in Turkey times the dollar price of Turkish Lire should equal the dollar price of Bread in the US. Absolute PPP will only hold if there is no risk premium embedded in the exchange rate. Developing countries have a notorious record of defaulting on obligations to foreigners. this depresses the value of developing counties currencies. This in turn makes the dollar price of basic goods in developing counties cheaper than they are here in the US. If you have any question please contaqct me,