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An Almost Ideal Cost of Living Index for Food in Spain Using a Microeconomic Approach and Censored Data


  • Elena Lasarte Navamuel
  • Dusan Paredes Araya
  • Esteban Fernández Vázquez


A true cost of living (COL) index should compare the cost derived by two consumption levels and two price vectors maintaining the same utility in the two cases. Its application and empirical testing has been, generally, focalized on a temporal perspective. A spatial perspective it is also interesting for economic analysis because it allows for making comparisons of COLs across geographical units. This spatial approach, however, it is not so frequent in the literature. The aim of this paper is to calculate a spatial COL index for the regions of Spain. For this purpose, we use microdata from the 2010 Households Budget Survey (HBS, Encuesta de Presupuestos Familiares ) provided by the Spanish Statistical Institute (INE, Instituto Nacional de Estadística ). We will denominate this index spatial cost of living index (SCOL). We use a microeconomic approach that keeps the level of utility of households constant across space but allows for substitution among different baskets of goods. The results reveal large differences in COL across the Spanish regions. The estimates of the SCOL index allows for reconsidering regional comparisons in terms of average wages. Even when nominal monetary figures from official Regional Accounts show huge regional disparities, regional differences are largely moderated when the wage figures are corrected by our SCOL index.

Suggested Citation

  • Elena Lasarte Navamuel & Dusan Paredes Araya & Esteban Fernández Vázquez, 2015. "An Almost Ideal Cost of Living Index for Food in Spain Using a Microeconomic Approach and Censored Data," Spatial Economic Analysis, Taylor & Francis Journals, vol. 10(4), pages 408-427, December.
  • Handle: RePEc:taf:specan:v:10:y:2015:i:4:p:408-427
    DOI: 10.1080/17421772.2015.1076573

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    Cited by:

    1. Elena Lasarte Navamuel & Esteban Fernández Vázquez & Fernando Rubiera Morollón, 2017. "Higher cost of living in urban areas? An AIDS-based analysis of food in Spain," Regional Studies, Taylor & Francis Journals, vol. 51(11), pages 1665-1677, November.

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