Using Local Expert Knowledge to Measure Prices: Evidence From a Survey Experiment in Vietnam

Many countries lack spatially disaggregated consumer price data needed to estimate real inequality and spatial patterns of poverty. Such data are especially absent in poor countries where weak infrastructure and high transport costs create large price variation over space. We experimented in Vietnam with a new way of obtaining disaggregated price data, using local expert knowledge to derive the mean and variance for prices of 64 consumer items in over 1000 communities. We used photographs of the specified items to ensure comparability of the reported prices. These new data are used to calculate regional cost‐of‐living indexes, which approximate benchmark multilateral price indexes calculated from traditional market price surveys. In comparison, two widely used no‐price methods, based on food Engel curves and based on unit values (survey group expenditures over group quantity) are poor proxy indicators for local prices and would distort estimates of real inequality and the spatial pattern of poverty. Prices from local expert informants also exhibit a key basic spatial feature of prices—the Alchian–Allen effect—which should become more important as food systems commercialize. Using expert knowledge to measure local prices is a low‐cost and feasible approach that could be adopted more widely in developing countries.