Biases in cross-space comparisons through cross-time price indexes: The case of Russia
AbstractLacking data on price levels across locations (countries, national regions, etc.) for cross-space comparisons, researchers resort to local consumer price indexes (CPIs) over time to evaluate these levels. This approach unfortunately fails to specify, even generally, the exactness of such proxies. Worse, the method is silent on whether the results are consistent, at least qualitatively, with those obtained using actual price levels. This paper aims to find an answer empirically, using data across Russian regions. Through comparison of CPI-proxied price levels with direct evaluations of regional price levels (i.e. Surinov spatial price indexes and the costs of a purchasing power basket), biases that distort the qualitative pattern of inter-regional differences are identified. Cross-region distributions for real income (calculated with CPI-proxied and directly evaluated price levels) for several points in time are estimated and compared. The CPI-induced biases are found to generally overstate inter-regional disparities.
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Bibliographic InfoPaper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 9/2006.
Length: 53 pages
Date of creation: 18 Aug 2006
Date of revision:
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More information through EDIRC
consumer price index; spatial price index; real income; nonhomothetic prefer-ences; Russia; Russian regions;
Find related papers by JEL classification:
- C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- P22 - Economic Systems - - Socialist Systems and Transition Economies - - - Prices
- R19 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Other
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