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The Cost of Living Index for Poor Households: The Case of Vietnam

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  • Nguyen Viet, Cuong

Abstract

The paper aims to estimate the Fisher index during the period 1994-1997 to explore how well the Laspeyres index can serve as the cost of living index. It is shown that the Laspeyres results in an upward substitution bias, and the bias appears to be higher for the ultra-poor and the poor. It means that for the very poor group the Laspeyres index overestimates their cost of living. With a limited budget the poor tends to have substitution to ensure a certain level of living standard. This suggests a remarkable point that if the basket weights are not revised frequently the Laspeyres index can present a significant bias from the cost of living, and this bias tends to be higher for the poor group. Since there is not a significant difference in the CPI between the poor and the non-poor and the whole population, CPI can be used as an approximate index of living cost of the poor as well as the non-poor for a period from one to three years.

Suggested Citation

  • Nguyen Viet, Cuong, 2002. "The Cost of Living Index for Poor Households: The Case of Vietnam," MPRA Paper 25628, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:25628
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    References listed on IDEAS

    as
    1. Atkinson, A B, 1987. "On the Measurement of Poverty," Econometrica, Econometric Society, vol. 55(4), pages 749-764, July.
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    5. Pollak, Robert A., 1989. "The Theory of the Cost-of-Living Index," OUP Catalogue, Oxford University Press, number 9780195058703.
    6. Willard C. Fisher, 1913. "The Tabular Standard in Massachusetts History," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 27(3), pages 417-454.
    7. Theil, Henri, 1979. "Variations across households in the rate of inflation," Economics Letters, Elsevier, vol. 4(1), pages 37-39.
    8. Michael, Robert T, 1979. "Variation across Households in the Rate of Inflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(1), pages 32-46, February.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Poverty measurement; living cost; CPI; household survey; Vietnam.;
    All these keywords.

    JEL classification:

    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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