Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212581 
Year of Publication: 
2006
Series/Report no.: 
BOFIT Discussion Papers No. 9/2006
Publisher: 
Bank of Finland, Institute for Economies in Transition (BOFIT), Helsinki
Abstract: 
Lacking data on price levels across locations (countries, national regions, etc.) for crossspace comparisons, researchers resort to local consumer price indexes (CPIs) over time to evaluate these levels.This approach unfortunately fails to specify, even generally, the exactness of such proxies.Worse, the method is silent on whether the results are consistent, at least qualitatively, with those obtained using actual price levels.This paper aims to find an answer empirically, using data across Russian regions.Through comparison of CPIproxied price levels with direct evaluations of regional price levels (i.e.Surinov spatial price indexes and the costs of a purchasing power basket), biases that distort the qualitative pattern of inter-regional differences are identified.Cross-region distributions for real income (calculated with CPI-proxied and directly evaluated price levels) for several points in time are estimated and compared.The CPI-induced biases are found to generally overstate inter-regional disparities.
Subjects: 
consumer price index
spatial price index
real income
nonhomothetic preferences
Russia
Russian regions
JEL: 
C43
E31
P22
R19
Persistent Identifier of the first edition: 
ISBN: 
952-462-826-0
Document Type: 
Working Paper

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