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Expenditure-based Interarea Cost of Living Index

Author

Listed:
  • Alexandru Voicu

    (Rutgers University, Department of Economics)

  • Michael L. Lahr

    (Rutgers University, Rutgers University, Center for Urban Policy Research)

Abstract

The main difficulty in comparing the cost-of-living among metropolitan areas is that, at this level, prices of most goods and services are not available. Even when the prices are available, constructing aggregate prices for groups of goods and services comparable across areas, is a difficult task. In this paper we attempt to construct a cost-of-living index for metropolitan areas, using only data on metropolitan-level expenditures. While our method circumvents the two problems mentioned above, it requires two assumptions regarding the level of utility attained across areas, and the effect of demand elasticity on the relationship priceexpenditure.

Suggested Citation

  • Alexandru Voicu & Michael L. Lahr, 2004. "Expenditure-based Interarea Cost of Living Index," Urban/Regional 0403006, EconWPA.
  • Handle: RePEc:wpa:wuwpur:0403006
    Note: Type of Document - pdf; pages: 20
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    File URL: http://econwpa.repec.org/eps/urb/papers/0403/0403006.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. Braithwait, Steven D, 1980. "The Substitution Bias of the Laspeyres Price Index: An Analysis Using Estimated Cost-of-Living Indexes," American Economic Review, American Economic Association, vol. 70(1), pages 64-77, March.
    3. Angus Deaton, 1998. "Getting Prices Right: What Should Be Done?," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 37-46, Winter.
    4. 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.
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    Cited by:

    1. Elena Lasarte Navamuel & Dusan Paredes & Esteban Fernández Vázquez, 2012. "A true cost of living index for Spain using a microeconomic approach and censored data," Documentos de Trabajo en Economia y Ciencia Regional 26, Universidad Catolica del Norte, Chile, Department of Economics, revised Aug 2012.

    More about this item

    Keywords

    Index; Cost of Living; metropolitan; macrolevel data;

    JEL classification:

    • R - Urban, Rural, Regional, Real Estate, and Transportation Economics

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