Lost in Translation: What do Engel Curves Tell us about the Cost of Living?

Arbeitspapier

The Hamilton method for estimating CPI bias is simple, intuitive, and has been widely adopted. We show that the method confiates CPI bias with variation in cost-of-living across income levels. Assuming a single price index across the income distribution is inconsistent with the downward sloping Engel curves that are necessary to implement the method. We develop and implement the Translated Engel curve (TEC) method that disentangles genuine CPI bias from differences caused by comparing changes in the cost of living across different income levels - non-homotheticity. The TEC method gives substantially different estimates of CPI bias prior to major reforms to the CPI in 1999 (post-Boskin), but both methods suggest very little CPI bias thereafter.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: CESifo Working Paper ; No. 6886

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Index Numbers and Aggregation; Leading indicators ; Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access ; Consumer Economics: Empirical Analysis ; Personal Income, Wealth, and Their Distributions ; Price Level; Inflation; Deflation
• Thema: Engel curves ; current price index ; cost of living

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Almås, Ingvild ; Beatty, Timothy K.M. ; Crossley, Thomas F.
• Ereignis: Veröffentlichung
• (wer): Center for Economic Studies and ifo Institute (CESifo)
• (wo): Munich
• (wann): 2018

Weitere Informationen

• Handle: http://hdl.handle.net/10419/176905
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ