## Consumption Based Estimates of Urban Chinese Growth

_IMF Working Papers, December 23, 2013_

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## Bibliographic details
- Authors: Marcos Chamon, Irineu E de Carvalho Filho
- Published: December 23, 2013
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484329672.001

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### Overview
- Paper estimates household income growth rates implied by food demand for a sample of urban Chinese households in 1993–2005.
- Authors: Marcos Chamon, Irineu E de Carvalho Filho.
- Date: December 23, 2013.
- Series: IMF Working Paper No. 2013/265.

### Methodology
- Approach: Estimates based on Engel curves for food consumption.
- Data scope: Urban Chinese household sample covering 1993–2005.
- Analytical focus: Implied per capita income growth from observed food demand versus nominal incomes deflated by the CPI.

### Key Findings
- Estimated average per capita income growth implied by food demand: 6.8 percent per year in 1993–2005.
- Average per capita income growth obtained by deflating nominal incomes by the CPI: 5.9 percent per year.
- Interpretation of discrepancy: Attributed to a small bias in the CPI, of a similar magnitude to the CPI bias often associated with the United States.
- Distributional finding: Stronger gains among poorer households; urban inflation up to 2005 in China was characterized as “pro-poor” because the increase in the cost of living for poorer households was smaller than for the average household.

### Interpretation and Policy Implications
- CPI bias: Results suggest the CPI undervalued true income growth by the difference between 6.8 percent and 5.9 percent per year over 1993–2005.
- Welfare distribution: Evidence that poorer urban households experienced relatively larger real income gains and faced smaller increases in cost of living up to 2005.
- Relevance: Findings inform assessments of measurement error in price deflators and the interpretation of income growth and inflation impacts across income groups.

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