Whose Inflation? A Characterization of the CPI Plutocratic Bias

Author/Editor:

Eduardo Ley

Publication Date:

May 1, 2001

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Prais (1958) showed that the CPI computed by statistical agencies can be interpreted as a weighed average of household price indexes, the weight of each household determined by its total expenditures. We decompose the difference between the standard CPI and a democratically weighed index (i.e., the plutocratic bias) as the product of average income, income inequality, and the covariance between individual price indexes and a parameter related to each good's income elasticity. This decomposition allows us to interpret variations in the size and sign of the plutocratic bias, and also to discuss issues pertaining to group indexes.

Series:

Working Paper No. 01/59

Subject:

English

Publication Date:

May 1, 2001

ISBN/ISSN:

9781451847949/1018-5941

Stock No:

WPIEA0592001

Format:

Paper

Pages:

17

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