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Whose Inflation? A Characterization of the CPI Plutocratic Gap

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Author Info
Eduardo Ley (IMF)

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Abstract

Prais (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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File URL: http://129.3.20.41/eps/pe/papers/0110/0110001.pdf
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Publisher Info
Paper provided by EconWPA in its series Public Economics with number 0110001.

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Length: 12 pages
Date of creation: 05 Oct 2001
Date of revision: 20 Oct 2001
Handle: RePEc:wpa:wuwppe:0110001

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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Related research
Keywords: Consumer price index; plutocratic index; democratic index; group index; aggregation; equivalence scales; inflation.;

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Find related papers by JEL classification:
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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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Jorgenson, Dale W & Slesnick, Daniel T, 1999. "Indexing Government Programs for Changes in the Cost of Living," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(2), pages 170-81, April.
  2. Deaton, Angus, 1998. "Getting Prices Right: What Should Be Done?," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 37-46, Winter. [Downloadable!] (restricted)
  3. S. Nuri Erbas & Chera L. Sayers, 1998. "Is the United States CPI Biased Across Income and Age Groups?," IMF Working Papers 98/136, International Monetary Fund.
  4. Frank A Cowell, 2006. "Inequality: Measurement," STICERD - Distributional Analysis Research Programme Papers 86, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE. [Downloadable!]
  5. Yitzhaki, Shlomo, 1996. "On Using Linear Regressions in Welfare Economics," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(4), pages 478-86, October.
  6. Pollak, Robert A, 1980. "Group Cost-of-Living Indexes," American Economic Review, American Economic Association, vol. 70(2), pages 273-78, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Thomas Crossley & Krishna Pendakur, 2006. "The social cost-of-living: welfare foundations and estimation," IFS Working Papers W06/10, Institute for Fiscal Studies. [Downloadable!]
    Other versions:
  2. Goni, Edwin & Lopez, Humberto & Serven, Luis, 2006. "Getting realabout inequality : evidence from Brazil, Colombia, Mexico, and Peru," Policy Research Working Paper Series 3815, The World Bank. [Downloadable!]
  3. Morné Oosthuizen, 2007. "Consumer Price Inflation across the Income Distribution in South Africa," Working Papers 96105, University of Cape Town, Development Policy Research Unit. [Downloadable!]
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