IDEAS home Printed from
   My bibliography  Save this paper

Spatial Variation in Prices and Expenditure Inequalities in Australia


  • Ankita Mishra
  • Ranjan Ray


This paper extends the recent literature on spatial price differences within a country to provide evidence on the Australian experience during the past two decades. While much of the existing evidence on spatial price variation within a country relates to large heterogeneous countries such as Brazil, India and Indonesia, Australia has not figured so far in this literature, because it is presumed to be homogeneous in all relevant respects. However, a series of unrelated events that affected the states and territories differently, such as the mining boom and the recent global financial crisis, has made Australia much more heterogeneous than is commonly assumed. The contribution of this study is both methodological and empirical. The paper proposes a method of calculating preference based intra country spatial price indices that measure the extent of price variation between regions in a given time period. It shows how the traditional concept of the ‘true cost of living index’, or the ‘exact price index’ as it is more commonly known, that is used in temporal price comparisons, can also be used in spatial price comparisons. The study also shows how the distributive impact of price changes can be evaluated over time. The Australian experience shows that the price movement has been regressive in all states. The empirical evidence on Australia is based on the extension of the recent EASI demand system that allows a more general form of preferences than has been considered previously. The results show that during the past two decades spatial price variation has increased steadily, with the most recent period (2005-9) witnessing a very large increase. The results also show that the ranking of the states, on both cost of living and inequality, has altered significantly over the past two decades. The results confirm that Australia is no longer the homogeneous country setting that was assumed previously.

Suggested Citation

  • Ankita Mishra & Ranjan Ray, 2013. "Spatial Variation in Prices and Expenditure Inequalities in Australia," Monash Economics Working Papers 34-13, Monash University, Department of Economics.
  • Handle: RePEc:mos:moswps:2013-34

    Download full text from publisher

    File URL:
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    1. Ingrid Nielsen & Russell Smyth & Qingguo Zhai, 2010. "Subjective Well-Being of China’s Off-Farm Migrants," Journal of Happiness Studies, Springer, vol. 11(3), pages 315-333, June.
    2. Schneider, Friedrich, 2005. "Shadow economies around the world: what do we really know?," European Journal of Political Economy, Elsevier, vol. 21(3), pages 598-642, September.
    3. Cheng, Zhiming & Smyth, Russell, 2015. "Sex and happiness," Journal of Economic Behavior & Organization, Elsevier, vol. 112(C), pages 26-32.
    4. Friedrich Schneider & Dominik Enste, 1999. "Shadow Economies Around the World - Size, Causes, and Consequences," CESifo Working Paper Series 196, CESifo Group Munich.
    5. Axel Dreher & Friedrich Schneider, 2010. "Corruption and the shadow economy: an empirical analysis," Public Choice, Springer, vol. 144(1), pages 215-238, July.
    6. Kam Wing Chan, 2010. "The Global Financial Crisis and Migrant Workers in China: 'There is No Future as a Labourer; Returning to the Village has No Meaning'," International Journal of Urban and Regional Research, Wiley Blackwell, vol. 34(3), pages 659-677, September.
    7. Borg, Mary O. & Stranahan, Harriet A., 2005. "Does Lottery Advertising Exploit Disadvantaged and Vulnerable Markets?," Business Ethics Quarterly, Cambridge University Press, vol. 15(01), pages 23-35, January.
    8. Harriet A. Stranahan & Mary O. Borg, 1998. "Separating the Decisions of Lottery Expenditures and Participation: a Truncated Tobit Approach," Public Finance Review, , vol. 26(2), pages 99-117, March.
    9. Stranahan, Harriet & Borg, Mary O., 1998. "Horizontal Equity Implications of the Lottery Tax," National Tax Journal, National Tax Association, vol. 51(1), pages 71-82, March.
    10. Nielsen, Ingrid & Smyth, Russell, 2008. "Who wants safer cities? Perceptions of public safety and attitudes to migrants among China's urban population," International Review of Law and Economics, Elsevier, vol. 28(1), pages 46-55, March.
    11. Scott, Frank & Garen, John, 1994. "Probability of purchase, amount of purchase, and the demographic incidence of the lottery tax," Journal of Public Economics, Elsevier, vol. 54(1), pages 121-143, May.
    12. Clotfelter, Charles T & Cook, Philip J, 1990. "On the Economics of State Lotteries," Journal of Economic Perspectives, American Economic Association, vol. 4(4), pages 105-119, Fall.
    13. Yaohui Zhao, 1999. "Leaving the Countryside: Rural-to-Urban Migration Decisions in China," American Economic Review, American Economic Association, vol. 89(2), pages 281-286, May.
    14. Stranahan, Harriet & Borg, Mary O., 1998. "Horizontal Equity Implications of the Lottery Tax," National Tax Journal, National Tax Association, vol. 51(n. 1), pages 71-82, March.
    15. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
    16. Charles T. Clotfelter & Philip J. Cook, 1987. "Implicit Taxation in Lottery Finance," NBER Working Papers 2246, National Bureau of Economic Research, Inc.
    17. Brad Humphreys & Yang Seung Lee & Brian P. Soebbing, 2011. "Modeling Consumers' Participation in Gambling Markets and Frequency of Gambling," Journal of Gambling Business and Economics, University of Buckingham Press, vol. 5(1), pages 1-22, March.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. repec:lrk:eeaart:36_1_9 is not listed on IDEAS
    2. Amita Majumder & Ranjan Ray, 2015. "Estimates of Spatial Prices in India and their Sensitivity to Alternative Estimation Methods and Choice of Items," Monash Economics Working Papers 11-15, Monash University, Department of Economics.
    3. Li, Lianyou & Song, Ze & Ma, Chao, 2015. "Engel curves and price elasticity in urban Chinese Households," Economic Modelling, Elsevier, vol. 44(C), pages 236-242.
    4. Carroll, David & Heaton, Christopher & Tani, Massimiliano, 2014. "Returns to University Quality in Australia: A Two-Stage Analysis," IZA Discussion Papers 8473, Institute for the Study of Labor (IZA).

    More about this item


    Spatial Price Indices; True Cost of Living Index; EASI Demand Model; Heterogeneous Country; and Expenditure Inequality.;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mos:moswps:2013-34. 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: (Simon Angus). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.