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On Calculating Cost-of-Living Index Numbers for Arbitrary Income Levels


  • Balk, Bert M


A method for computing (approximate) cost-of-living index numbers for arbitrary reference income levels is presented. It combines the use of fairly disaggregated data with a relatively modest use of econometric methods. The basis ingredients are (1) a series of chained Tornqvist price index numbers relating to per capital total expenditure, (2) price index numbers for the commodities distinguished, and (3) the income parameters of a differential demand system. This method attains second order precision and is equivalent to a full econometric method based on a translog utility function. The method is demonstrated on Netherlands data for 1952-81. Copyright 1990 by The Econometric Society.

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  • Balk, Bert M, 1990. "On Calculating Cost-of-Living Index Numbers for Arbitrary Income Levels," Econometrica, Econometric Society, vol. 58(1), pages 75-92, January.
  • Handle: RePEc:ecm:emetrp:v:58:y:1990:i:1:p:75-92

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    References listed on IDEAS

    1. Giacomini, Raffaella & Komunjer, Ivana, 2005. "Evaluation and Combination of Conditional Quantile Forecasts," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 416-431, October.
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    3. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
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    5. Hahn, Jinyong, 1997. "Bayesian Bootstrap of the Quantile Regression Estimator: A Large Sample Study," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(4), pages 795-808, November.
    6. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
    7. White, Halbert & Kim, Tae-Hwan, 2002. "Estimation, Inference, and Specification Testing for Possibly Misspecified Quantile Regression," University of California at San Diego, Economics Working Paper Series qt1s38s0dn, Department of Economics, UC San Diego.
    8. Amanda Gosling & Stephen Machin & Costas Meghir, 2000. "The Changing Distribution of Male Wages in the U.K," Review of Economic Studies, Oxford University Press, vol. 67(4), pages 635-666.
    9. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-442, June.
    10. Koenker,Roger, 2005. "Quantile Regression," Cambridge Books, Cambridge University Press, number 9780521845731, March.
    11. Moshe Buchinsky & Jinyong Hahn, 1998. "An Alternative Estimator for the Censored Quantile Regression Model," Econometrica, Econometric Society, vol. 66(3), pages 653-672, May.
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    13. José Mata & José A. F. Machado, 2005. "Counterfactual decomposition of changes in wage distributions using quantile regression," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(4), pages 445-465.
    14. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics,in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier.
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    Cited by:

    1. Hoffmann, Johannes, 1998. "Probleme der Inflationsmessung in Deutschland," Discussion Paper Series 1: Economic Studies 1998,01, Deutsche Bundesbank.
    2. Baye, Michael R. & Black, Dan A., 1991. "A differential measure of the real wage index," Economics Letters, Elsevier, vol. 36(3), pages 295-298.
    3. Aliakbar KHOSRAVINEJAD, "undated". "Welfare Effects of Food Desubsidization For Iranian Urban Households (The Index Number and Demand System Approach)," EcoMod2008 23800063, EcoMod.
    4. Marshall Reinsdorf & Jack E. Triplett, 2009. "A Review of Reviews: Ninety Years of Professional Thinking About the Consumer Price Index," NBER Chapters,in: Price Index Concepts and Measurement, pages 17-83 National Bureau of Economic Research, Inc.
    5. Shireen AlAzzawi, 2017. "Did the Cost of Living Rise Faster for the Rural Poor?," Working Papers 1091, Economic Research Forum, revised 05 Apr 2017.
    6. W. Erwin Diewert, 1995. "Price and Volume Measures in the System of National Accounts," NBER Working Papers 5103, National Bureau of Economic Research, Inc.
    7. Hill, Robert J., 2006. "Superlative index numbers: not all of them are super," Journal of Econometrics, Elsevier, vol. 130(1), pages 25-43, January.
    8. W. Erwin Diewert, 1995. "Axiomatic and Economic Approaches to Elementary Price Indexes," NBER Working Papers 5104, National Bureau of Economic Research, Inc.

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