IDEAS home Printed from https://ideas.repec.org/p/zbw/bubdps/042019.html
   My bibliography  Save this paper

Anatomy of regional price differentials: Evidence from micro price data

Author

Listed:
  • Weinand, Sebastian
  • von Auer, Ludwig

Abstract

Over the last three decades the supply of economic statistics has vastly improved. Unfortunately, statistics on regional price levels (sub-national purchasing power parities) have been exempt from this positive trend, even though they are indispensable for meaningful spatial comparisons of regional output, income, wages, productivity, standards of living, and poverty. To improve the situation, our paper demonstrates that a highly disaggregated and reliable regional price index can be compiled from data that already exist. We use the micro price data that have been collected for Germany's Consumer Price Index in May 2016. For the computation we introduce a multi-stage version of the Country-Product-Dummy method. The unique quality of our price data set allows us to depart from previous spatial price comparisons and to compare only exactly identical products. We find that the price levels of the 402 counties and cities of Germany are largely driven by the cost of housing and to a much lesser degree by the prices of goods and services. The overall price level in the most expensive region, Munich, is about 27 percent higher than in the cheapest region. Our results also reveal strong spatial autocorrelation.

Suggested Citation

  • Weinand, Sebastian & von Auer, Ludwig, 2019. "Anatomy of regional price differentials: Evidence from micro price data," Discussion Papers 04/2019, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubdps:042019
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/191926/1/1048875938.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Dikhanov, Yuri & Palanyandy, Chellam & Capilit, Eileen, 2011. "Subnational Purchasing Power Parities toward Integration of International Comparison Program and Consumer Price Index: The Case of the Philippines," ADB Economics Working Paper Series 290, Asian Development Bank.
    2. Deckers Thomas & Falk Armin & Schildberg-Hörisch Hannah, 2016. "Nominal or Real? The Impact of Regional Price Levels on Satisfaction with Life," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(3), pages 1337-1358, September.
    3. Angus Deaton & Olivier Dupriez, 2011. "Spatial price differences within large countries," Working Papers 1321, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
    4. Deaton, Angus, 1988. "Quality, Quantity, and Spatial Variation of Price," American Economic Review, American Economic Association, vol. 78(3), pages 418-430, June.
    5. Dipankor Coondoo & Amita Majumder & Somnath Chattopadhyay, 2011. "Estimating Spatial Consumer Price Indices Through Engel Curve Analysis," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 57(1), pages 138-155, March.
    6. David G. Blanchflower & Andrew J. Oswald, 1995. "An Introduction to the Wage Curve," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 153-167, Summer.
    7. Jan Cadil & Petr Mazouch & Petr Musil & Jana Kramulova, 2014. "True regional purchasing power: evidence from the Czech Republic," Post-Communist Economies, Taylor & Francis Journals, vol. 26(2), pages 241-256, June.
    8. Brandt, Loren & Holz, Carsten A, 2006. "Spatial Price Differences in China: Estimates and Implications," Economic Development and Cultural Change, University of Chicago Press, vol. 55(1), pages 43-86, October.
    9. D. Coondoo & A. Majumder & R. Ray, 2004. "A Method of Calculating Regional Consumer Price Differentials with Illustrative Evidence from India," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 50(1), pages 51-68, March.
    10. Erwin Diewert, 2005. "Weighted Country Product Dummy Variable Regressions And Index Number Formulae," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 51(4), pages 561-570, December.
    11. Uwe Blien & Hermann Gartner & Heiko Stüber & Katja Wolf, 2009. "Regional price levels and the agglomeration wage differential in western Germany," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 43(1), pages 71-88, March.
    12. repec:pri:rpdevs:spatial_price_differences_in_large_countries-_10-jul_2011_complete is not listed on IDEAS
    13. Barker, David, 2003. "Length of residence discounts, turnover, and demand elasticity. Should long-term tenants pay less than new tenants?," Journal of Housing Economics, Elsevier, vol. 12(1), pages 1-11, March.
    14. Manisha Chakrabarty & Amita Majumder & Ranjan Ray, 2015. "Preferences, Spatial Prices and Inequality," Journal of Development Studies, Taylor & Francis Journals, vol. 51(11), pages 1488-1501, November.
    15. Bettina H. Aten, 1999. "Cities in Brazil: An Interarea Price Comparison," NBER Chapters, in: International and Interarea Comparisons of Income, Output, and Prices, pages 211-229, National Bureau of Economic Research, Inc.
    16. Bernhard Faller & Christoph Helbach, & Andreas Vater & Reiner Braun, 2009. "Möglichkeiten zur Bildung eines Regionalindex Wohnkosten unter Verwendung von Angebotsdaten," RatSWD Research Notes 34, German Data Forum (RatSWD).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Goldfayn-Frank, Olga & Wohlfart, Johannes, 2020. "Expectation formation in a new environment: Evidence from the German reunification," Journal of Monetary Economics, Elsevier, vol. 115(C), pages 301-320.
    2. Lichner, Ivan & Lyócsa, Štefan & Výrostová, Eva, 2022. "Nominal and discretionary household income convergence: The effect of a crisis in a small open economy," Structural Change and Economic Dynamics, Elsevier, vol. 61(C), pages 18-31.
    3. Weinand, Sebastian, 2020. "Measuring spatial price differentials: A comparison of stochastic index number methods," Discussion Papers 12/2020, Deutsche Bundesbank.
    4. Chen,Xiaomeng & Mungai,Rose & Nakamura,Shohei & Pearson,Thomas Patrick & Wambile,Ayago Esmubancha & Yoshida,Nobuo, 2020. "How Useful is CPI Price Data for Spatial Price Adjustment in Poverty Measurement? : A Case from Ghana," Policy Research Working Paper Series 9388, The World Bank.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sebastian Weinand & Ludwig von Auer, 2019. "Anatomy of Regional Price Differentials: Evidence From Micro Price Data," RatSWD Working Papers 268, German Data Forum (RatSWD).
    2. Sebastian Weinand & Ludwig von Auer, 2019. "Anatomy of Regional Price Differentials: Evidence From Micro Price Data," Research Papers in Economics 2019-03, University of Trier, Department of Economics.
    3. Menggen Chen & Yan Wang & D. S. Prasada Rao, 2020. "Measuring the spatial price differences in China with regional price parity methods," The World Economy, Wiley Blackwell, vol. 43(4), pages 1103-1146, April.
    4. Amita Majumder & Ranjan Ray, 2020. "National and subnational purchasing power parity: a review," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 47(2), pages 103-124, June.
    5. Petr Jansk & Marek ediv, 2018. "How Do Regional Price Levels Affect Income Inequality? Household-level Evidence From 21 Countries," LIS Working papers 752, LIS Cross-National Data Center in Luxembourg.
    6. José‐María Montero & Tiziana Laureti & Román Mínguez & Gema Fernández‐Avilés, 2020. "A Stochastic Model with Penalized Coefficients for Spatial Price Comparisons: An Application to Regional Price Indexes in Italy," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 66(3), pages 512-533, September.
    7. Laureti, Tiziana & Prasada Rao, D.S., 2018. "Measuring Spatial Price Level Differences within a Country: Current status and Future Developments /Medición de las diferencias de nivel de precios espaciales dentro de un país: Estado actual y evoluc," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 36, pages 119-148, Enero.
    8. Amita Majumder & Ranjan Ray, 2017. "Estimates of Spatial Prices in India and Their Sensitivity to Alternative Estimation Methods and Choice of Commodities," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 131(1), pages 145-167, March.
    9. Rokicki, Bartlomiej & Blien, Uwe & Hewings, Geoffrey J. D. & Phan thi Hong, Van, 2020. "Is there a Wage Curve with Regional Real Wages?," IAB-Discussion Paper 202017, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    10. Laureti Tiziana & Polidoro Federico, 2022. "Using Scanner Data for Computing Consumer Spatial Price Indexes at Regional Level: An Empirical Application for Grocery Products in Italy," Journal of Official Statistics, Sciendo, vol. 38(1), pages 23-56, March.
    11. Luigi Biggeri & Tiziana Laureti & Federico Polidoro, 2017. "Computing Sub-national PPPs with CPI Data: An Empirical Analysis on Italian Data Using Country Product Dummy Models," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 131(1), pages 93-121, March.
    12. Rokicki, Bartlomiej & Blien, Uwe & Hewings, Geoffrey J.D. & thi Hong Van, Phan, 2021. "Is there a wage curve with regional real wages? An analysis for the US and Poland," Economic Modelling, Elsevier, vol. 102(C).
    13. Amita Majumder & Ranjan Ray & Kompal Sinha, 2015. "Estimating Purchasing Power Parities from Household Expenditure Data Using Complete Demand Systems with Application to Living Standards Comparison: India and Vietnam," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 61(2), pages 302-328, June.
    14. Amita Majumder & Ranjan Ray, 2015. "Estimates of Spatial Prices in India and their Sensitivity to Alternative Estimation Methods and Choice of Items," Monash Economics Working Papers 11-15, Monash University, Department of Economics.
    15. Manisha Chakrabarty & Amita Majumder & Ranjan Ray, 2018. "A Framework for the Simultaneous Measurement of Spatial Variation and Temporal Movement in Prices in a Heterogeneous Country: The Dynamic Household Regional Product Dummy Model," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 64(3), pages 703-730, September.
    16. Martina Menon & Federico Perali & Ranjan Ray & Nicola Tommasi, 2019. "The Tale of the Two Italies: Regional Price Parities Accounting for Differences in the Quality of Services," Working Papers 20/2019, University of Verona, Department of Economics.
    17. Menon, Martina & Perali, Federico & Ray, Ranjan & Tommasi, Nicola, 2023. "Heterogeneity in prices and cost of living within a country: New evidence on the north-south divide in Italy," Economic Modelling, Elsevier, vol. 126(C).
    18. Amita Majumder & Ranjan Ray & Kompal Sinha, 2014. "A Unified Framework for the Estimation of Intra and Inter Country Food Purchasing Power Parities with Application to Cross Country Comparisons of Food Expenditure: India, Indonesia and Vietnam," Monash Economics Working Papers 31-14, Monash University, Department of Economics.
    19. Ranjan Ray, 2017. "The Role of Prices in Welfare Comparisons: Methodological Developments and a Selective Survey of the Empirical Literature," The Economic Record, The Economic Society of Australia, vol. 93(301), pages 314-332, June.
    20. Amita Majumder & Ranjan Ray & Kompal Sinha, 2011. "Estimating Intra Country and Cross Country Purchasing Power Parities from Household Expenditure Data Using Single Equation and Complete Demand Systems Approach: India and Vietnam," Monash Economics Working Papers 34-11, Monash University, Department of Economics.

    More about this item

    Keywords

    spatial price comparison; regional price index; PPP; CPD-method; hedonic regression; consumer price data;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:bubdps:042019. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/dbbgvde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.