Does One Size Fit All? The CPI and Canadian Seniors
This paper examines the effectiveness of the CPI as a measure of inflation faced by Canadian seniors. I construct a democratic price index and show that the average inflation rate (average when measured by the CPI) is often a very poor measure of inflation rates relevant to individual households. The proportion of individual, household specific price indexes falling more then one percentage point above or more then one percentage point below the CPI often remains high regardless of how closely the mean democratic index approximates the CPI. Further, I demonstrate that the CPI has considerably overstated the inflation faced by Canadian seniors during 1970s and 1980s while more or less accurately capturing inflation during the 1990s. I show that the limitations of the CPI apply to both the senior and the non-senior Canadians in a nearly equal manner. The proportion of individual inflation rates falling significantly above or below the CPI is similar for both segments of the society and so is the time pattern of overstating the average inflation rate.
|Date of creation:||Sep 2005|
|Date of revision:|
|Contact details of provider:|| Postal: 1280 Main Street West, Hamilton, Ontario, L8S 4M4|
Phone: (905) 525-9140 ext. 22765
Fax: (905) 521-8232
Web page: http://www.mcmaster.ca/economics/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- W. Erwin Diewert, 1998. "Index Number Issues in the Consumer Price Index," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 47-58, Winter.
- Allan Crawford, 1998. "Measurement biases in the Canadian CPI: An update," Bank of Canada Review, Bank of Canada, vol. 1998(Spring), pages 39-56.
- Wood, Robert G & Corcoran, Mary E & Courant, Paul N, 1993. "Pay Differences among the Highly Paid: The Male-Female Earnings Gap in Lawyers' Salaries," Journal of Labor Economics, University of Chicago Press, vol. 11(3), pages 417-41, July.
- Angus Deaton, 1998. "Getting Prices Right: What Should Be Done?," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 37-46, Winter.
- Michael J. Boskin, 1998. "Consumer Prices, the Consumer Price Index, and the Cost of Living," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 3-26, Winter.
- Beatty, Timothy K.M. & Larsen, Erling Roed, 2004.
"Using Engel Curves To Estimate Bias In The Canadian Cpi As A Cost Of Living Index,"
15836, University of British Columbia, Food and Resource Economics.
- 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.
- James Banks & Richard Blundell & Arthur Lewbel, 1997. "Quadratic Engel Curves And Consumer Demand," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 527-539, November.
- Adonis Yatchew, 1998. "Nonparametric Regression Techniques in Economics," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 669-721, June.
- 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.
- Katharine G. Abraham & John S. Greenlees & Brent R. Moulton, 1998. "Working to Improve the Consumer Price Index," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 27-36, Winter.
When requesting a correction, please mention this item's handle: RePEc:mcm:sedapp:130. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.