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Whose Inflation? a Characterization of the CPI Plutocratic Bias

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  • Eduardo Ley

Abstract

Prais (1958) showed that the CPI computed by statistical agencies can be interpreted as a weighed average of household price indexes, the weight of each household determined by its total expenditures. We decompose the difference between the standard CPI and a democratically weighed index (i.e., the plutocratic bias) as the product of average income, income inequality, and the covariance between individual price indexes and a parameter related to each good''s income elasticity. This decomposition allows us to interpret variations in the size and sign of the plutocratic bias, and also to discuss issues pertaining to group indexes.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 01/59.

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Length: 17
Date of creation: 01 May 2001
Date of revision:
Handle: RePEc:imf:imfwpa:01/59

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Keywords: Income; Economic models; expenditure; equation; expenditures; survey; covariance; total expenditures; statistics; total expenditure; computation; sample mean; aggregate expenditure; sampling; expenditure shares; equations; expenditure patterns; independent variable; statistician; linear regressions; financial statistics; distributional assumption; surveys; regression analysis;

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  1. 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.
  2. 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.
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Cited by:
  1. Alvaro Montenegro, 2004. "50 años del índice de precios en Colombia," DOCUMENTOS DE ECONOMÍA 001904, UNIVERSIDAD JAVERIANA - BOGOTÁ.

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