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Prices and Unit Values in Poverty Measurement and Tax Reform Analysis

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  • John Gibson
  • Scott Rozelle

Abstract

Researchers often use unit values (household expenditures on a commodity divided by the quantity purchased) as proxies for market prices when calculating poverty lines and estimating consumer demand equations. Such proxies are often needed because community price surveys in developing economies are either absent or suffer quality problems. However, using unit values may result in biases due to measurement error and quality effects. In a household survey experiment, information on prices was obtained in three ways: from unit values, from a market price survey, and from the opinions of householders who were shown pictures of items and asked to report the local price. The three sets of price data are used to calculate poverty lines, estimate price elasticities, and analyze marginal tax reforms. There are substantial biases when unit values are used as a proxy for market price, even when sophisticated correction methods are applied. Performance was better for the price opinions of household members. The results highlight the importance of price collection methods and the need to consider the wider costs of having potentially unreliable community-level price data. Copyright 2005, Oxford University Press.

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Bibliographic Info

Article provided by World Bank Group in its journal The World Bank Economic Review.

Volume (Year): 19 (2005)
Issue (Month): 1 ()
Pages: 69-97

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Handle: RePEc:oup:wbecrv:v:19:y:2005:i:1:p:69-97

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Cited by:
  1. McKelvey, Christopher, 2011. "Price, unit value, and quality demanded," Journal of Development Economics, Elsevier, vol. 95(2), pages 157-169, July.
  2. Amita Majumder & Ranjan Ray & Kompal Sinha, 2011. "The Calculation of Rural Urban Food Price Differentials from Unit Values in Household Expenditure Surveys: A new procedure and comparison with existing methods," Development Research Unit Working Paper Series 24-11, Monash University, Department of Economics.
  3. Maia, Carlos & Van der Berg, Servaas, 2010. "When the remedy is worse than the disease: Adjusting survey income data for price differentials, with special reference to Mozambique," MPRA Paper 26571, University Library of Munich, Germany.
  4. Amita Majumder & Ranjan Ray & Kompal Sinha, 2011. "Estimating Intra Country and Cross Country Purchasing Power Parities from Household Expenditure Data Using Single Equation and Complete Demand Systems Approach: India and Vietnam," Development Research Unit Working Paper Series 34-11, Monash University, Department of Economics.
  5. John Gibson & Bonggeun Kim, 2012. "Do the Urban Poor Face Higher Food Prices? Evidence from Vietnam," Working Papers in Economics 12/16, University of Waikato, Department of Economics.
  6. Mandleni, B. & Anim, F.D.K., 2010. "Consumer Characteristics Associated With Food Prices," 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa 113784, African Association of Agricultural Economists (AAAE);Agricultural Economics Association of South Africa (AEASA).
  7. Charles Ackah, & Simon Appleton, . "Food Price Changes and Consumer Welfare in Ghana in the 1990s," Discussion Papers 07/03, University of Nottingham, CREDIT.
  8. Meng, Xin & Gregory, Robert & Wan, Guanghua, 2006. "China Urban Poverty and its Contributing Factors, 1986-2000," Working Paper Series RP2006/133, World Institute for Development Economic Research (UNU-WIDER).
  9. Amita Majumder & Ranjan Ray & Kompal Sinha, 2012. "Spatial Comparisons of Prices and Expenditure in a Heterogeneous Country: Methodology with Application to India," Development Research Unit Working Paper Series 19-12, Monash University, Department of Economics.

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