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Comparing the True Cost of Living Indices of Demographically Different Households

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  • Panayiota Lyssiotou
  • Panos Pashardes

Abstract

The comparison of true cost of living indices between demographically different households (relative equivalence scale) is argued to be sensitive to the way demographic characteristics enter demand analysis. In particular, parameters reflecting the cost of demographic characteristics at base prices, though themselves do not have welfare (equivalence scale) interpretation, can alter the benchmark from which demographically varying inflation effects are measured. The empirical analysis, based on a rank‐3 demand system applied to UK individual household data, shows that the inflation adjustment of child benefits can vary with the way demographic costs at base period prices are specified.

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  • Panayiota Lyssiotou & Panos Pashardes, 2004. "Comparing the True Cost of Living Indices of Demographically Different Households," Bulletin of Economic Research, Wiley Blackwell, vol. 56(1), pages 21-39, January.
    • Handle: RePEc:bla:buecrs:v:56:y:2004:i:1:p:21-39
    DOI: 10.1111/j.1467-8586.2004.00186.x
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    References listed on IDEAS

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    1. Sutirtha Bandyopadhyay & Bharat Ramaswami, 2022. "The representative agent bias in cost of living indices," Bulletin of Economic Research, Wiley Blackwell, vol. 74(1), pages 155-178, January.

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