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Whose inflation? A characterization of the CPI plutocratic gap

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Eduardo Ley

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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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File URL: http://hdl.handle.net/10.1093/oep/gpi040
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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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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. 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, vol. 17(2), pages 170-81, April.
  2. Deaton, Angus, 1998. "Getting Prices Right: What Should Be Done?," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 37-46, Winter. [Downloadable!] (restricted)
  3. S. Nuri Erbas & Chera L. Sayers, 1998. "Is the United States CPI Biased Across Income and Age Groups?," IMF Working Papers 98/136, International Monetary Fund.
  4. Frank A Cowell, 2006. "Inequality: Measurement," STICERD - Distributional Analysis Research Programme Papers 86, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE. [Downloadable!]
  5. Yitzhaki, Shlomo, 1996. "On Using Linear Regressions in Welfare Economics," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(4), pages 478-86, October.
  6. Pollak, Robert A, 1980. "Group Cost-of-Living Indexes," American Economic Review, American Economic Association, vol. 70(2), pages 273-78, May. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Goni, Edwin & Lopez, Humberto & Serven, Luis, 2006. "Getting realabout inequality : evidence from Brazil, Colombia, Mexico, and Peru," Policy Research Working Paper Series 3815, The World Bank. [Downloadable!]
  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 155, McMaster University. [Downloadable!]
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  3. Morné Oosthuizen, 2007. "Consumer Price Inflation across the Income Distribution in South Africa," Working Papers 96105, University of Cape Town, Development Policy Research Unit. [Downloadable!]
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