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Spatial differences in the cost of living (English)

A method that represents income and poverty differences within a country more accurately than do methods based on money income measures is described. Focusing on the cost of basic requirements of food and nonfood categories, a cost index of a basket typically consumed by the poor is built up. The index is used to deflate money estimates into real estimates. The cost of living index also is combined with income estimates to obtain measures of regional differences in poverty that are more accurate than those based on money income estimates. Using Peru as a case study, it is shown that the cost differences have significant implications for measures of real income and poverty across regions and between urban and rural areas. A detailed derivation of the nonfood price index is appended.

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Citation

Speer,Thomas V.

Spatial differences in the cost of living (English). World Bank reprint series ; no. REP 157 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/324131467980467478/Spatial-differences-in-the-cost-of-living