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Price Heterogeneity and "Real" Inequality: A Case Study of Prices and Poverty in Rural South India

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  • Rao, Vijayendra

Abstract

This paper, based upon a case-study of three Indian villages, studies whether households within the same market pay different prices for identical goods. It is found that not only are unit prices for food heterogeneous, but that the poor pay more for the same goods than the rich. This is because liquidity constraints force poorer households to purchase goods in small quantities and consequently subject them to quantity premiums. Household specific index numbers are used to adjust nominal incomes to real values and it is found that Gini coefficients of real incomes are between 12 percent to 23 percent greater than the Gini for nominal incomes. An econometric analysis of the determinants of prices shows that incomes are negatively correlated with prices, as is family size, but that the amount of land owned shows a positive relationship. Copyright 2000 by The International Association for Research in Income and Wealth.

Suggested Citation

  • Rao, Vijayendra, 2000. "Price Heterogeneity and "Real" Inequality: A Case Study of Prices and Poverty in Rural South India," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 46(2), pages 201-211, June.
    • Handle: RePEc:bla:revinw:v:46:y:2000:i:2:p:201-11
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    Cited by:

    1. Gibson, John & Kim, Bonggeun, 2013. "Do the urban poor face higher food prices? Evidence from Vietnam," Food Policy, Elsevier, vol. 41(C), pages 193-203.
    2. Khera, Reetika, 2014. "Cash vs. in-kind transfers: Indian data meets theory," Food Policy, Elsevier, vol. 46(C), pages 116-128.
    3. March, Raymond J. & Carpio, Carlos E. & Boonsaeng, Tullaya & Lyford, Conrad P., 2020. "Do SNAP Recipients Get the Best Prices?," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 52(1), pages 135-159, February.
    4. Gadenne, Lucie, 2018. "Do Ration Shop Systems Increase Welfare? Theory and an Application to India," CAGE Online Working Paper Series 358, Competitive Advantage in the Global Economy (CAGE).
    5. Lucie Gadenne, 2020. "Can Rationing Increase Welfare? Theory and an Application to India's Ration Shop System," American Economic Journal: Economic Policy, American Economic Association, vol. 12(4), pages 144-177, November.
    6. Christophe Muller, 2005. "Poverty and inequality under income and price dispersions," Canadian Journal of Economics, Canadian Economics Association, vol. 38(3), pages 979-998, August.
    7. Christoph Lakner & Branko Milanovic, 2016. "Global Income Distribution: From the Fall of the Berlin Wall to the Great Recession," The World Bank Economic Review, World Bank, vol. 30(2), pages 203-232.
    8. John Gibson & Bonggeun Kim, 2018. "Economies of scale, bulk discounts, and liquidity constraints: comparing unit value and transaction level evidence in a poor country," Review of Economics of the Household, Springer, vol. 16(1), pages 21-39, March.
    9. Mussa, Richard, 2014. "Food Price Heterogeneity and Income Inequality in Malawi: Is Inequality Underestimated?," MPRA Paper 56080, University Library of Munich, Germany.
    10. Jean-Louis Warnholz (QEH), "undated". "Poverty Reduction for Profit? A Critical Examination of Business Opportunities at the Bottom of the Pyramid," QEH Working Papers qehwps160, Queen Elizabeth House, University of Oxford.
    11. Ulrik Beck, 2015. "Keep it real: Measuring real inequality using survey data from developing countries," WIDER Working Paper Series 133, World Institute for Development Economic Research (UNU-WIDER).
    12. Richard Mussa, 2015. "Do the Poor Pay More for Maize in Malawi?," Journal of International Development, John Wiley & Sons, Ltd., vol. 27(4), pages 546-563, 05-27.
    13. Rischke, Ramona & Kimenju, Simon C. & Klasen, Stephan & Qaim, Matin, 2015. "Supermarkets and food consumption patterns: The case of small towns in Kenya," Food Policy, Elsevier, vol. 52(C), pages 9-21.
    14. Coady, David P., 2004. "Designing and evaluating social safety nets," FCND discussion papers 172, International Food Policy Research Institute (IFPRI).

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