Urban Welfare Analysis Using Within-City Data

This paper presents an analysis of welfare in Brazilian cities and regions by introducing a Spatial Cost of Living Index (SCOL) that utilizes detailed household expenditure data at the within-city area level. By adjusting consumption-based welfare indicators for regional price differences, the study provides a more accurate depiction of poverty and inequality across urban landscapes. The findings reveal significant variations in living costs among Brazilian states, metropolitan areas and non-metropolitan cities, impacting poverty assessments. The analysis underscores the limitations of relying solely on nominal income or expenditure figures, as incorporating spatial price variations alters poverty headcount ratios and reshapes the understanding of regional disparities. Ignoring cost of living differences puts 8.3 million individuals living in the capital cities and surrounding metropolitan areas above the adjusted poverty line; conversely, 4.5 million individuals living in the non-metropolitan cities are wrongly classified as being below the adjusted poverty line. Sensitivity tests confirm the robustness of SCOL-adjusted estimates across various poverty thresholds.