Goods Prices and Availability in Cities
AbstractThis paper uses detailed barcode data on purchase transactions by households in 49 U.S. cities to overcome a large number of problems that have plagued spatial price index measurement. We identify two important sources of bias. Heterogeneity bias arises from comparing different goods in different locations, and variety bias arises from not correcting for the fact that some goods are unavailable in some locations. Eliminating heterogeneity bias causes 97 percent of the variance in the price level of food products across cities to disappear relative to a conventional index. Eliminating both biases reverses the common finding that prices tend to be higher in larger cities. Instead, we find that price level for food products falls with city size.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17067.
Date of creation: May 2011
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- R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-05-30 (All new papers)
- NEP-GEO-2011-05-30 (Economic Geography)
- NEP-URE-2011-05-30 (Urban & Real Estate Economics)
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