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Prices and Unit Values in Poverty Measurement and Tax Reform Analysis

Author

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  • John Gibson
  • Scott Rozelle

Abstract

Researchers often use unit values (household expenditures on a commodity divided by the quantity purchased) as proxies for market prices when calculating poverty lines and estimating consumer demand equations. Such proxies are often needed because community price surveys in developing economies are either absent or suffer quality problems. However, using unit values may result in biases due to measurement error and quality effects. In a household survey experiment, information on prices was obtained in three ways: from unit values, from a market price survey, and from the opinions of householders who were shown pictures of items and asked to report the local price. The three sets of price data are used to calculate poverty lines, estimate price elasticities, and analyze marginal tax reforms. There are substantial biases when unit values are used as a proxy for market price, even when sophisticated correction methods are applied. Performance was better for the price opinions of household members. The results highlight the importance of price collection methods and the need to consider the wider costs of having potentially unreliable community-level price data. Copyright 2005, Oxford University Press.

Suggested Citation

  • John Gibson & Scott Rozelle, 2005. "Prices and Unit Values in Poverty Measurement and Tax Reform Analysis," World Bank Economic Review, World Bank Group, vol. 19(1), pages 69-97.
  • Handle: RePEc:oup:wbecrv:v:19:y:2005:i:1:p:69-97
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    Cited by:

    1. Maystadt, Jean-François & Duranton, Gilles, 2014. "The development push of refugees: Evidence from Tanzania:," IFPRI discussion papers 1377, International Food Policy Research Institute (IFPRI).
    2. Majumder, Amita & Ray, Ranjan & Sinha, Kompal, 2015. "Spatial Comparisons Of Prices And Expenditure In A Heterogeneous Country: Methodology With Application To India," Macroeconomic Dynamics, Cambridge University Press, vol. 19(05), pages 931-989, July.
    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. 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.
    5. Elleby, Christian, 2014. "Poverty and Price Transmission," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182722, European Association of Agricultural Economists.
    6. Mandleni, B. & Anim, F.D.K., 2010. "Consumer Characteristics Associated With Food Prices," 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa 113784, African Association of Agricultural Economists (AAAE);Agricultural Economics Association of South Africa (AEASA).
    7. 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.
    8. Gibson, John & Kim, Bonggeun, 2015. "Hicksian separability does not hold over space: Implications for the design of household surveys and price questionnaires," Journal of Development Economics, Elsevier, vol. 114(C), pages 34-40.
    9. Amita Majumder & Ranjan Ray & Kompal Sinha, 2011. "The Calculation of Rural Urban Food Price Differentials from Unit Values in Household Expenditure Surveys: A new procedure and comparison with existing methods," Monash Economics Working Papers 24-11, Monash University, Department of Economics.
    10. McKelvey, Christopher, 2011. "Price, unit value, and quality demanded," Journal of Development Economics, Elsevier, vol. 95(2), pages 157-169, July.
    11. Andalón, Mabel & Gibson, John, 2017. "The 'Soda Tax' is Unlikely to Make Mexicans Lighter: New Evidence on Biases in Elasticities of Demand for Soda," IZA Discussion Papers 10765, Institute for the Study of Labor (IZA).
    12. Gaddis,Isis, 2016. "Prices for poverty analysis in Africa," Policy Research Working Paper Series 7652, The World Bank.
    13. Carlos Maia & Servaas van der Berg, 2010. "When the remedy is worse than the disease: Adjusting survey income data for price differentials, with special reference to Mozambique," Working Papers 24/2010, Stellenbosch University, Department of Economics.
    14. Jean-Francois Maystadt & Gilles Duranton, 2014. "The development push of refugees," Working Papers 66910685, Lancaster University Management School, Economics Department.
    15. 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.
    16. Charles Ackah, & Simon Appleton, "undated". "Food Price Changes and Consumer Welfare in Ghana in the 1990s," Discussion Papers 07/03, University of Nottingham, CREDIT.
    17. Meng, Xin & Gregory, Robert & Wan, Guanghua, 2006. "China Urban Poverty and its Contributing Factors, 1986-2000," WIDER Working Paper Series 133, World Institute for Development Economic Research (UNU-WIDER).
    18. Zhen Liu & Arne Henningsen, 2016. "The effects of China's Sloping Land Conversion Program on agricultural households," Agricultural Economics, International Association of Agricultural Economists, vol. 47(3), pages 295-307, May.
    19. repec:bla:asiaps:v:4:y:2017:i:3:p:405-416 is not listed on IDEAS
    20. 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.
    21. John Gibson & Alessandro Romeo, 2017. "Fiscal-Food Policies are Likely Misinformed by Biased Price Elasticities from Household Surveys: Evidence from Melanesia," Asia and the Pacific Policy Studies, Wiley Blackwell, vol. 4(3), pages 405-416, September.

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