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IMF Staff Papers Logo  Last updated:March 2003
Volume 50, Number 1
The Plutocratic Gap in the CPI: Evidence from Spain
Mario Izquierdo, Eduardo Ley, and Javier Ruiz-Castillo

Full Text of this Article (PDF 212K)

Abstract: The plutocratic gap is defined as the difference between the inflation measured according to the current official consumer price index (CPI) and a democratic index in which all households receive the same weight. During 1992–97, the plutocratic gap in Spain averaged 0.055 percentage points a year. Since positive and negative gaps cancel out, however, the average absolute gap is significantly larger: 0.090 percentage points a year. For the purposes of accounting for the plutocratic gap, a 53-dimensional commodity space can be conveniently reduced to two dimensions: a luxury index and a necessities index. [JEL C43, D31, D63]

2003 International Monetary Fund