Whose Inflation? A Characterization of the CPI Plutocratic Bias
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Summary:
Prais (1958) showed that the CPI computed by statistical agencies can be interpreted as a weighed average of household price indexes, the weight of each household determined by its total expenditures. We decompose the difference between the standard CPI and a democratically weighed index (i.e., the plutocratic bias) as the product of average income, income inequality, and the covariance between individual price indexes and a parameter related to each good's income elasticity. This decomposition allows us to interpret variations in the size and sign of the plutocratic bias, and also to discuss issues pertaining to group indexes.
Series:
Working Paper No. 2001/059
Subject:
Consumer price indexes Household consumption Income Income inequality Inflation National accounts Personal income Prices
English
Publication Date:
May 1, 2001
ISBN/ISSN:
9781451847949/1018-5941
Stock No:
WPIEA0592001
Pages:
17
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