My blog post today is rather short and more like a little fun exercise to gain familiarity with the concept of Purchasing Power Parity and the PPP exchange rate. I researched the price for a postcard as well as a 100 gram (3.53oz) letter charged by the post offices of ten countries around the world and then used the PPP exchange rate* to convert the values into international dollars. My initial goal was to see whether there are substantial differences that can be explained due to competition or non-competition in the market. However, as the table below shows, each country has very different thresholds which makes cross-country comparisons for at least the 100 gram letter somewhat difficult. It skews the picture in particular for New Zealand, Germany and South Africa, which do not have a category for the 100 gram letter itself.
|Country||max weight||max length||max width||max thickness|
It is also important to note that Canada’s, France’s New Zealand’s, and the UK’s rates for postcards are identical to their rates for small letters, while countries like Germany or the USA price differentiate between these two. In general, postcards are mostly taken as any cards below 10 grams, but the exact maximum length and width can vary. From personal experience, I know that Germany can be quite strict in these regards, levying surcharges for non-standard sizes if you’re unlucky.
|Country||PPP Exchange rate*||Postcard LCU||Letter LCU||Postcard int.$||Letter int.$|
After obtaining the prices for the ten countries I went to the World Development Indicators published by the World Bank (2016) and downloaded the PPP conversion factor for each. The latest year available is 2014. One then has to divide the currency by the PPP exchange rate to obtain the value in international dollars which can then be compared while accounting for different purchasing power parity.
In both categories Norway has the highest prices. A domestic 100 gram letter, for example, costs twice as much in Norway compared to the USA. The UK and New Zealand benefit in this category in particular, because their post offices (Royal Mail and NZ Post) have a single band for letters up to 100 grams and 500 grams, respectively. They do not price differentiate while countries like France or Germany have the thirst threshold, i.e. price increase, after 20 grams already. This is why New Zealand ends up being actually cheapest in my ranking here. So, the fun fact: if you could really fit 500 gram into a standard New Zealand letter, you would get the greatest value for your money relative to all the other countries.
In terms of the postcards, the picture is less skewed as there is less volatility in size and weight. It is a less heterogeneous product as the postcard mail service tends to be more standardized. It is therefore probably better for comparison if one really wanted to study postal services and their effectiveness across countries. Postcards are cheapest in Bangladesh at only 7 cents. France, Canada and the UK rank in the upper part, mainly because they charge the same prices for small letters and postcards putting their services at the more expensive end. This could arguable be a deterrent for writing postcards, inducing people to maximize their utility gained from the postal service and writing heavier letters instead than light-weight postcards. Germany’s postcards are actually quite cheap and comparable to India’s prices when using the PPP exchange rate method. This does not take into account the quality of service though. And while the USA’s postal service (USPS) is still a monopoly, it actually does perform pretty well in my postcard comparison, coming second after Bangladesh if one just looks at the prices.
As highlighted before, these statistics are more a little exercise and are of limited value because the postal service is not a homogeneous good and countries do vary greatly in their service offerings. What is more, there will be cross-country variation in the quality of service. Thanks for reading!
*PPP conversion factor, GDP (LCU per international $)
World Bank (2016). PPP conversion factor, GDP (LCU per international $) [Data file]. Retrieved from: http://databank.worldbank.org/data/home.aspx