Whose Cost of Living?

Nicholson, J. L.

doi:10.2307/2345215

Cited by 26 publications

(13 citation statements)

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“…Of course, the non-homotheticity of preferences also implies that the CPI, which is a single price index, estimates the cost of living at one point in the income distribution an observation made long ago by Prais (1959) and Nicholson (1975). Therefore the implication of preferences being non-homothetic is that the CPI and P t each estimate a cost of living index for a specic level of income, but these two income levels need not be the same.…”

Section: Lost In Translationmentioning

confidence: 99%

Lost in translation: What do Engel curves tell us about the cost of living?

Almås¹,

Beatty²,

Crossley³

2018

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The Hamilton method for estimating CPI bias is simple, intuitive, and has been widely adopted. We show that the method conates CPI bias with variation in cost-ofliving 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 dierences caused by comparing changes in the cost of living across dierent income levels-non-homotheticity. The TEC method gives substantially dierent estimates of CPI bias prior to major reforms to the CPI in 1999 (post-Boskin), but both methods suggest very little CPI bias thereafter. * Almås acknowledges valuable support from Vetenskapsrådet (the Swedish Research Council), ESOP,

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Section: Lost In Translationmentioning

confidence: 99%

Lost in translation: What do Engel curves tell us about the cost of living?

Almås¹,

Beatty²,

Crossley³

2018

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“…Because the CPI fails to capture the benefits to consumers from greater availability of products and brands, changes in the cost of living are typically overstated. (Nicholson 1975, Deaton 1998. In times of changing relative prices, such as during food price shocks, inflation measured by the CPI can then differ from the inflation experienced by poorer population groups (Günther and Grimm 2007).…”

Section: Cpi Bias In Sub-saharan Africamentioning

confidence: 99%

CPI Bias and its Implications for Poverty Reduction in Africa

2019

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The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

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“…This research was suggested by Nicholson (1975) but not until Michael (1979), whose work was extended by Hagemann (1982), do we get some estimates of price inflation's varying impact across household types. Slottje (1987) looked at the consequence of relative price changes across income components.…”

Section: Introductionmentioning

confidence: 99%

The political market for real income redistribution through choice of the weights in COLAs

Basmann

Diamond

Scully³

et al. 1990

Public Choice

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This paper studies alternative cost-of-living indexes derived from the generalized Fechner-Thurstone (GFT) utility form, their use in contracts for cost-of-living adjustments (COLAs), and the resulting effect of choice of index on the distribution of real income. The indexes and their distributional effects are compared to the officially reported Consumer Price Index (CPI) and a CPI computed from the same data set used to compute the GFT indexes. It is found that the choice of index used in adjustment clauses in contracts has an impact on the distribution of real income of the group. As an example, the U.S. federal government schedule of wages and salaries is adjusted from 1981 through 1984 by all of the indexes reported here. Use of alternative indexes illuminates the normative assumptions regarding the relative importance of different income strata (among other things) implicit in any public practice of pegging COLAs to a single form of price index.

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Whose Cost of Living?

Cited by 26 publications

References 0 publications

Lost in translation: What do Engel curves tell us about the cost of living?

Lost in translation: What do Engel curves tell us about the cost of living?

CPI Bias and its Implications for Poverty Reduction in Africa

The political market for real income redistribution through choice of the weights in COLAs

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