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Using Engel Curves to Estimate CPI Bias for the Elderly

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Abstract

We use shifts in food Engel curves among the U.S. elderly to estimate the extent of Consumer Price Index (CPI) bias specific to this population. Over the last thirty years the share of total expenditure devoted to food has declined more rapidly for elderly-headed households than for other households. This decline is not explained by a more rapid increase in measured total expenditure for the elderly, or by relative change in other covariates such as household composition. We present this as evidence that the true cost of living increased more slowly for the elderly than for the nonelderly over this period, in contrast to conventional wisdom that the elderly face a higher inflation rate.

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  • Scrimgeour, Dean & Gorry, James, 2015. "Using Engel Curves to Estimate CPI Bias for the Elderly," Working Papers 2015-03, Department of Economics, Colgate University, revised 08 Jun 2015.
    • Handle: RePEc:cgt:wpaper:2015-03
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    More about this item

    Keywords

    Engel curve; CPI bias; cost of living; retirement; elderly;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination

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