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The CPI, Mirror of the Cost of Living in France? Evidence based on the Engel Curves Analysis

Author

Listed:
  • M.-É. CLERC

    (Insee)

  • É. COUDIN

    (Insee)

Abstract

This paper studies the existence of an diverging trend between the French Consumer Price Index and the cost of living, by an intertemporal comparison of food Engel curves. We use the methodology developed by Costa (2001) and Hamilton (2001). CPI bias estimates are derived from the gap between the CPI-deflated Engel curves estimated at different dates. The French CPI series and the French Household Budget surveys (Budget de Famille) from 1979 to 2006 are used. The analysis is performed by categories of households. A large range of techniques is used to alleviate potential problems that may occur with survey data: robust estimation, instrumental techniques, or rescaling in order to correct potential imperfect declarations. The results differ according to the choice of using raw survey data or data rescaled on National Accounts aggregates. However, even though the conclusions on the magnitudes of the biases differ, bias estimates are always non-negative. As a consequence, the results found do not support the widespread presumption that the French CPI would have under-estimated changes in the cost of living between 1979 and 2006.

Suggested Citation

  • M.-É. Clerc & É. Coudin, 2010. "The CPI, Mirror of the Cost of Living in France? Evidence based on the Engel Curves Analysis," Documents de Travail de l'Insee - INSEE Working Papers g2010-04, Institut National de la Statistique et des Etudes Economiques.
    • Handle: RePEc:nse:doctra:g2010-04
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    File URL: https://www.bnsp.insee.fr/ark:/12148/bc6p06zqpkb/f1.pdf
    File Function: Document de travail de la DESE numéro G2010-04
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    More about this item

    Keywords

    Cost of Living; Consumer Price Index; CPI bias; Cost of living index; Engel law; Engel curves;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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