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Price Heterogeneity and "Real" Inequality: A Case Study of Prices and Poverty in Rural South India

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  • Rao, Vijayendra

Abstract

This paper, based upon a case-study of three Indian villages, studies whether households within the same market pay different prices for identical goods. It is found that not only are unit prices for food heterogeneous, but that the poor pay more for the same goods than the rich. This is because liquidity constraints force poorer households to purchase goods in small quantities and consequently subject them to quantity premiums. Household specific index numbers are used to adjust nominal incomes to real values and it is found that Gini coefficients of real incomes are between 12 percent to 23 percent greater than the Gini for nominal incomes. An econometric analysis of the determinants of prices shows that incomes are negatively correlated with prices, as is family size, but that the amount of land owned shows a positive relationship. Copyright 2000 by The International Association for Research in Income and Wealth.

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Article provided by International Association for Research in Income and Wealth in its journal Review of Income & Wealth.

Volume (Year): 46 (2000)
Issue (Month): 2 (June)
Pages: 201-11

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Handle: RePEc:bla:revinw:v:46:y:2000:i:2:p:201-11

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Cited by:
  1. Mussa, Richard, 2014. "Food Price Heterogeneity and Income Inequality in Malawi: Is Inequality Underestimated?," MPRA Paper 56080, University Library of Munich, Germany.
  2. Christophe Muller, 2005. "Poverty and inequality under income and price dispersions," Canadian Journal of Economics, Canadian Economics Association, vol. 38(3), pages 979-998, August.
  3. Khera, Reetika, 2014. "Cash vs. in-kind transfers: Indian data meets theory," Food Policy, Elsevier, vol. 46(C), pages 116-128.
  4. Lakner, Christoph & Milanovic, Branko, 2013. "Global income distribution : from the fall of the Berlin Wall to the great recession," Policy Research Working Paper Series 6719, The World Bank.
  5. Gibson, John & Kim, Bonggeun, 2013. "Do the urban poor face higher food prices? Evidence from Vietnam," Food Policy, Elsevier, vol. 41(C), pages 193-203.
  6. Coady, David P., 2004. "Designing and evaluating social safety nets," FCND discussion papers 172, International Food Policy Research Institute (IFPRI).
  7. Jean-Louis Warnholz (QEH), . "Poverty Reduction for Profit? A Critical Examination of Business Opportunities at the Bottom of the Pyramid," QEH Working Papers qehwps160, Queen Elizabeth House, University of Oxford.
  8. Mussa, Richard, 2014. "Do the Poor Pay More for Maize in Malawi?," MPRA Paper 54623, University Library of Munich, Germany.

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