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Biases in cross-spave comparisons through cross-time price indexes: the case of Russia

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  • Gluschenko, Konstantin

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.

Suggested Citation

  • Gluschenko, Konstantin, 2006. "Biases in cross-spave comparisons through cross-time price indexes: the case of Russia," BOFIT Discussion Papers 9/2006, Bank of Finland Institute for Emerging Economies (BOFIT).
    • Handle: RePEc:zbw:bofitp:bdp2006_009
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    Cited by:

    1. K. P. Gluschenko, 2022. "Costs of Living and Real Incomes in the Russian Regions," Regional Research of Russia, Springer, vol. 12(3), pages 365-377, September.

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    More about this item

    Keywords

    consumer price index; spatial price index; real income; nonhomothetic preferences; Russia; Russian regions;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • P22 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Prices
    • R19 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Other

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