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Whose inflation? A characterization of the CPI plutocratic gap

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  • Eduardo Ley

Abstract

Prais (1958) showed that the standard CPI computed by most statistical agencies can be interpreted as a weighted average of household price indexes, where the weight of each household is determined by its total expenditures. In this paper, we decompose the CPI plutocratic gap--i.e. the difference between the standard CPI and a democratically-weighted index, where each household has the same weight--as the product of expenditure inequality and the sample covariance between the elementary individual price indexes and a term which is a function of the expenditure elasticity of each good. This decomposition allows us to interpret variations in the size and sign of the plutocratic gap, and to discuss issues pertaining to group indexes. Copyright 2005, Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal Oxford Economic Papers.

Volume (Year): 57 (2005)
Issue (Month): 4 (October)
Pages: 634-646

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Handle: RePEc:oup:oxecpp:v:57:y:2005:i:4:p:634-646

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  1. S. Nuri Erbas & Chera L. Sayers, 1998. "Is the United States CPI Biased Across Income and Age Groups?," IMF Working Papers, International Monetary Fund 98/136, International Monetary Fund.
  2. Angus Deaton, 1998. "Getting Prices Right: What Should Be Done?," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 12(1), pages 37-46, Winter.
  3. Mario Izquierdo & Eduardo Ley & Javier Ruiz-Castillo, 2003. "The Plutocratic Gap in the CPI: Evidence from Spain," IMF Staff Papers, Palgrave Macmillan, Palgrave Macmillan, vol. 50(1), pages 7.
  4. Yitzhaki, Shlomo, 1996. "On Using Linear Regressions in Welfare Economics," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 14(4), pages 478-86, October.
  5. Newbery, David M, 1995. "The Distributional Impact of Price Changes in Hungary and the United Kingdom," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 105(431), pages 847-63, July.
  6. Jorgenson, Dale W & Slesnick, Daniel T, 1999. "Indexing Government Programs for Changes in the Cost of Living," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 17(2), pages 170-81, April.
  7. Pollak, Robert A, 1980. "Group Cost-of-Living Indexes," American Economic Review, American Economic Association, American Economic Association, vol. 70(2), pages 273-78, May.
  8. Frank Cowell, 2006. "Inequality: measurement," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 2686, London School of Economics and Political Science, LSE Library.
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Cited by:
  1. Ehrmann, Michael & Tzamourani, Panagiota, 2012. "Memories of high inflation," European Journal of Political Economy, Elsevier, Elsevier, vol. 28(2), pages 174-191.
  2. Thomas F. Crossley & Krishna Pendakur, 2006. "The Social Cost-of-Living: Welfare Foundations and Estimation," Social and Economic Dimensions of an Aging Population Research Papers, McMaster University 155, McMaster University.
  3. Morne Oosthuizen, 2013. "Inflation Inequality In South Africa," Working Papers, University of Cape Town, Development Policy Research Unit 13158, University of Cape Town, Development Policy Research Unit.
  4. Goni, Edwin & Lopez, Humberto & Serven, Luis, 2006. "Getting realabout inequality : evidence from Brazil, Colombia, Mexico, and Peru," Policy Research Working Paper Series, The World Bank 3815, The World Bank.
  5. Morné Oosthuizen, 2007. "Consumer Price Inflation across the Income Distribution in South Africa," Working Papers, University of Cape Town, Development Policy Research Unit 07129, University of Cape Town, Development Policy Research Unit.
  6. repec:ebl:ecbull:v:4:y:2002:i:3:p:1-5 is not listed on IDEAS
  7. David Fielding, 2010. "Non-monetary Determinants of Inflation Volatility: Evidence from Nigeria," Journal of African Economies, Centre for the Study of African Economies (CSAE), Centre for the Study of African Economies (CSAE), vol. 19(1), pages 111-139, January.
  8. Liberati, Paolo, 2012. "Democratic, Plutocratic and Social Weights in Price Indexes," MPRA Paper 43978, University Library of Munich, Germany.

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