The Plutocratic Bias in the CPI: Evidence from Spain

By Javier Ruiz Castillo, Eduardo Ley, Mario Izquierdo

October 1, 2000

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Javier Ruiz Castillo, Eduardo Ley, and Mario Izquierdo. The Plutocratic Bias in the CPI: Evidence from Spain, (USA: International Monetary Fund, 2000) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

We define the plutocratic bias as the difference between inflation measured according to the current official CPI and a democratic index in which all households receive the same weight. We estimate that during the 1990s the plutocratic bias in Spain amounts to 0.055 percent per year. However, positive and negative biases cancel off when averaging over the whole period. The mean absolute bias is significantly larger, 0.090. We can explain most of the oscillations experimented by the plutocratic bias by the price behavior of three goods: a luxury good and two necessities.

Subject: Consumer price indexes, Expenditure, Household consumption, Inflation, National accounts, Price indexes, Prices, Total expenditures

Keywords: Aggregation, Commodity space, Consumer price index, Consumer price indexes, Cost-of-living index, CPI system, Household consumption, Household expenditure, Inflation, Laspeyres price indexes representative, Least squares, Luxury good, Plutocratic bias, Price indexes, Total expenditures, United States CPI, WP

Publication Details

Pages:

25
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2000/167
Stock No:

WPIEA1672000
ISBN:

9781451858174
ISSN:

1018-5941

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