The CPI, Mirror of the Cost of Living in France? Evidence based on the Engel Curves Analysis
This paper studies the existence of an diverging trend between the French Consumer Price Index and the cost of living, by an intertemporal comparison of food Engel curves. We use the methodology developed by Costa (2001) and Hamilton (2001). CPI bias estimates are derived from the gap between the CPI-deflated Engel curves estimated at different dates. The French CPI series and the French Household Budget surveys (Budget de Famille) from 1979 to 2006 are used. The analysis is performed by categories of households. A large range of techniques is used to alleviate potential problems that may occur with survey data: robust estimation, instrumental techniques, or rescaling in order to correct potential imperfect declarations. The results differ according to the choice of using raw survey data or data rescaled on National Accounts aggregates. However, even though the conclusions on the magnitudes of the biases differ, bias estimates are always non-negative. As a consequence, the results found do not support the widespread presumption that the French CPI would have under-estimated changes in the cost of living between 1979 and 2006.
|Date of creation:||2010|
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- Deaton, Angus, 1995.
"Data and econometric tools for development analysis,"
Handbook of Development Economics,in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 3, chapter 33, pages 1785-1882
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- Timothy Beatty & Erling Røed Larsen, 2005. "Using Engel curves to estimate bias in the Canadian CPI as a cost of living index," Canadian Journal of Economics, Canadian Economics Association, vol. 38(2), pages 482-499, May.
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- John Gibson & Steven Stillman & Trinh Le, 2004. "CPI Bias and Real Living Standards in Russia During the Transition," Working Papers in Economics 04/02, University of Waikato.
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- Bruce W. Hamilton, 2001. "Using Engel's Law to Estimate CPI Bias," American Economic Review, American Economic Association, vol. 91(3), pages 619-630, June. Full references (including those not matched with items on IDEAS)
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