Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5097307 | Journal of Econometrics | 2008 | 19 Pages |
Abstract
This paper proposes a new method for estimating true cost-of-living (Konüs) indices, for large numbers of commodities, using data only on prices, aggregate budget shares and aggregate expenditure. Conventional chain indices are path-dependent unless income elasticities are (implausibly) all equal to 1. The method allows this difficulty to be overcome. I show that to estimate a Konüs index, only income and not price elasticities are required. The method is applied to estimate a Konüs price index for 70 products covering nearly all the UK's Retail Prices Index over 1974-2004, using the Quadratic Almost Ideal Demand System. The choice of base year for utility has a significant effect on the index.
Related Topics
Physical Sciences and Engineering
Mathematics
Statistics and Probability
Authors
Nicholas Oulton,