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      Using Engel curves to measure CPI bias for Indonesia

      Olivia, Susan; Gibson, John
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      Economics_wp_0612.pdf
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      Olivia, S. & Gibson, J (2012). Using Engel curves to measure CPI bias for Indonesia. (Department of Economics Working Paper Series, Number 06/12). Hamilton, New Zealand: University of Waikato.
      Permanent Research Commons link: https://hdl.handle.net/10289/6694
      Abstract
      To measure real income growth over time a price index is needed to adjust for changes in the cost of living. The Consumer Price Index (CPI) is often used for this task but studies from several countries show the CPI is a biased measure of changes in the cost of living, leading to potentially wrong estimates of the rate of growth of real income. In this paper CPI bias for Indonesia is calculated by estimating food Engel curves for households with the same level of CPI-deflated incomes at four different points in time between 1993 and 2008. The results suggest CPI bias was initially negative during the Asian Crisis but has been positive since 2000. Over the entire period, CPI bias has averaged four percent annually, equivalent to almost one-third of the measured inflation rate.
      Date
      2012-06
      Type
      Working Paper
      Series
      Department of Economics Working Paper Series
      Report No.
      06/12
      Publisher
      University of Waikato
      Rights
      ©2012 The Authors
      Collections
      • Management Papers [1125]
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