Whose Inflation? A Characterization of the CPI Plutocratic Gap
AbstractPrais (1958) showed that the standard CPI computed by most statistical agencies can be interpreted as a weighted average of household price indexes, where the weight of each household is determined by its total expenditures. In this paper, we analytically decompose the difference between the standard CPI and a democratically weighted index (ie, the CPI plutocratic-democratic gap) as the product of expenditure inequality and the sample covariance between the elementary individual price indexes and a parameter which is a function of the expenditure elasticity of each good. This decomposition allows us to interpret variations in the size and sign of the plutocratic-democratic gap, and also to discuss issues pertaining to group indexes.
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Bibliographic InfoPaper provided by EconWPA in its series Public Economics with number 0110001.
Length: 12 pages
Date of creation: 05 Oct 2001
Date of revision: 20 Oct 2001
Note: Forthcoming in Oxford Economic Papers. Type of Document - PDF; prepared on MacOSX - CMac; to print on any printer; pages: 12; figures: none
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Consumer price index; plutocratic index; democratic index; group index; aggregation; equivalence scales; inflation.;
Other versions of this item:
- Eduardo Ley, 2005. "Whose inflation? A characterization of the CPI plutocratic gap," Oxford Economic Papers, Oxford University Press, vol. 57(4), pages 634-646, October.
- C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
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