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Calculating Rural-Urban Food Price Differentials from Unit Values in Household Expenditure Surveys: A Comparison with Existing Methods and A New Procedure

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  • Amita Majumder
  • Ranjan Ray
  • Kompal Sinha

Abstract

While purchasing power parity (PPP) between countries has received a great deal of attention, PPP calculations within countries have received less attention. The idea that one unit of currency has the same purchasing power in all regions in large countries is false. This paper addresses this limitation by proposing a methodology for calculating rural-urban PPP in India. The paper introduces a concept of item-specific PPP that exploits the analogy with an item-specific equivalence scale. The methodology relies on demographically-varying preferences to estimate PPP. The results underline the need to incorporate spatial differences in PPP calculations in countries with heterogeneous preferences. Copyright 2012, Oxford University Press.

Suggested Citation

  • Amita Majumder & Ranjan Ray & Kompal Sinha, 2012. "Calculating Rural-Urban Food Price Differentials from Unit Values in Household Expenditure Surveys: A Comparison with Existing Methods and A New Procedure," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(5), pages 1218-1235.
  • Handle: RePEc:oup:ajagec:v:94:y:2012:i:5:p:1218-1235
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    File URL: http://hdl.handle.net/10.1093/ajae/aas064
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    Citations

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    Cited by:

    1. Nakamura,Shohei & Harati,Rawaa & Lall,Somik V. & Dikhanov,Yuri M. & Hamadeh,Nada & Vigil Oliver,William & Rissanen,Marko Olavi & Yamanaka,Mizuki, 2016. "Is living in African cities expensive ?," Policy Research Working Paper Series 7641, The World Bank.
    2. Bain, Robert & Bartram, Jamie & Luyendijk, Rolf, 2013. "Universal Access to Drinking Water: The Role of Aid," WIDER Working Paper Series 088, World Institute for Development Economic Research (UNU-WIDER).
    3. 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.
    4. Amita Majumder & Ranjan Ray & Sattwik Santra, 2016. "Global and Country Poverty Rates, Welfare Rankings of the Regions and Purchasing Power Parities: How Robust Are the Results?," Monash Economics Working Papers 11-16, Monash University, Department of Economics.
    5. Javier García-Enríquez & Cruz A. Echevarría, 2016. "Consistent Estimation of a Censored Demand System and Welfare Analysis: The 2012 VAT Reform in Spain," Journal of Agricultural Economics, Wiley Blackwell, vol. 67(2), pages 324-347, June.
    6. repec:spr:agfoec:v:2:y:2014:i:1:p:1-27 is not listed on IDEAS
    7. repec:lrk:eeaart:36_1_9 is not listed on IDEAS
    8. Mousumi Das, 2014. "Measures, spatial profile and determinants of dietary diversity: Evidence from India," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2014-045, Indira Gandhi Institute of Development Research, Mumbai, India.
    9. Balié, Jean & Magrini, Emiliano & Morales Opazo, Cristian, 2016. "Cereal price shocks and volatility in Sub-Saharan Africa: What does really matter for farmers' welfare?," DARE Discussion Papers 1607, Georg-August University of Göttingen, Department of Agricultural Economics and Rural Development (DARE).
    10. 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.
    11. Gaddis,Isis, 2016. "Prices for poverty analysis in Africa," Policy Research Working Paper Series 7652, The World Bank.
    12. Silva, Andres & Etilé, Fabrice & Boizot-Szantai, Christine & Dharmasena, Senarath, 2013. "The Impact of Beverage Taxes on Quantity and Quality of Consumption in France," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150428, Agricultural and Applied Economics Association.
    13. Cali, Massimiliano & Farole, Thomas & Kunaka, Charles & Wagle, Swarnim, 2014. "Integrating border regions : connectivity and competitiveness in South Asia," Policy Research Working Paper Series 6987, The World Bank.
    14. repec:bla:ecorec:v:93:y:2017:i:301:p:314-332 is not listed on IDEAS
    15. repec:spr:hecrev:v:2:y:2014:i:1:p:1-27 is not listed on IDEAS
    16. Majumder,Amita & Ray,Ranjan & Santra,Sattwik, 2015. "Preferences, purchasing power parity, and inequality : analytical framework, propositions, and empirical evidence," Policy Research Working Paper Series 7395, The World Bank.

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