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Biases in cross-space comparisons through cross-time price indexes: The case of Russia

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  • Gluschenko, Konstantin

    ()
    (Institute of Economics and Industrial Engineering, Siberian Branch of the Russian)

Abstract

Lacking 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 Info

Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 9/2006.

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Length: 53 pages
Date of creation: 18 Aug 2006
Date of revision:
Handle: RePEc:hhs:bofitp:2006_009

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Related research

Keywords: consumer price index; spatial price index; real income; nonhomothetic prefer-ences; Russia; Russian regions;

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References

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  1. von Auer, Ludwig, 2002. "Spurious inflation: The legacy of Laspeyres and others," The Quarterly Review of Economics and Finance, Elsevier, vol. 42(3), pages 529-542.
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Cited by:
  1. Chao Li & John Gibson, 2012. "Rising Regional Inequality in China: Fact or Artefact?," Working Papers in Economics 12/09, University of Waikato, Department of Economics.
  2. Chao Li & John Gibson, 2013. "Spatial Price Differences and Inequality in China: Housing Market Evidence," Working Papers in Economics 13/06, University of Waikato, Department of Economics.
  3. Gibson, John & Stillman, Steven & Le, Trinh, 2008. "CPI bias and real living standards in Russia during the transition," Journal of Development Economics, Elsevier, vol. 87(1), pages 140-160, August.
  4. Gluschenko, Konstantin, 2009. "Методы Анализа Межрегионального Неравенства По Доходам И Их Приложение К России
    [Methodologies of analyzing inter-regional incom
    ," MPRA Paper 18443, University Library of Munich, Germany.
  5. Arne Melchior, 2008. "Regional Inequality and Convergence in Europe, 1995-2005," CASE Network Studies and Analyses 0374, CASE-Center for Social and Economic Research.
  6. Arne Melchior, 2009. "East-West Integration and the Economic Geography of Europe," CASE Network Studies and Analyses 0379, CASE-Center for Social and Economic Research.
  7. Almås, Ingvild & Johnsen, Åshild Auglænd, 2012. "The cost of living in China: Implications for inequality and poverty," Discussion Paper Series in Economics 21/2012, Department of Economics, Norwegian School of Economics.

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