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Estimating a CPI-based regional price parity index for US cities

Author

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  • Steven Bond-Smith

    (University of Hawai‘i at MÄ noa, University of Hawai‘i Economic Research Organization)

  • Younghan Lee

    (University of Hawai‘i at MÄ noa, Department of Economics)

Abstract

We use metropolitan area Consumer Price indexes (CPI) and the US CPI to calculate a CPI-based Regional Price Parity index (CPI-based RPP) for the 29 US cities with CPIs published by the Bureau of Labor Statistics. This CPI-based RPP can be used (along with the US CPI) to make fair comparisons of economic performance in US cities (over time) at comparable (and constant) prices for any period with published CPI data. The Bureau of Economic Analysis (BEA) publishes a similar PCE Price Index-based Regional Price Parity Index (BEA RPP), but the BEA RPP is only published annually back to 2008, with a year delay. Prior to our project, there was no suitable price comparison index for adjusting economic data for geographic price differences in periods outside this range or with more frequent observations. We draw on the properties of price parity indexes to estimate our CPI-based RPP. This requires estimating average relative CPI price levels for a known period, re-leveling CPIs to be consistent with average relative levels in the known period, and calculating the CPI-based RPP for any period based on relative re-leveled local and national CPIs. This results in a CPI-based RPP for any period with published CPI data, as far back as 1913 in some cities through to the most recent CPI observations. We demonstrate the index by exploring regional price trends and examining real per capita GDP and real per capita personal income at constant and comparable prices.

Suggested Citation

  • Steven Bond-Smith & Younghan Lee, 2025. "Estimating a CPI-based regional price parity index for US cities," Working Papers 2025-2, University of Hawaii Economic Research Organization, University of Hawaii at Manoa.
    • Handle: RePEc:hae:wpaper:2025-2
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