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When do Relative Prices Matter for Measuring Income Inequality?: The Case of Food Prices in Mozambique

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  • Channing Arndt
  • Sam Jones
  • Vincenzo Salvucci

Abstract

Changes in the relative prices of commodities consumed in different shares across income groups are known to influence real measures of inequality. Using household budget survey and price data in Mozambique from 2002/03 and 2008/09, we show that accounting for the relative price changes driven by the food and fuel price crisis substantially increases real inequality, by about two Gini points. This result is obtained by computing a price deflator that explicitly reflects divergent price dynamics of different product categories.

Suggested Citation

  • Channing Arndt & Sam Jones & Vincenzo Salvucci, 2014. "When do Relative Prices Matter for Measuring Income Inequality?: The Case of Food Prices in Mozambique," WIDER Working Paper Series wp-2014-129, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:wp-2014-129
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