Prices, Engel Curves, and Time-Space Deflation
Many developing countries lack spatially disaggregated price data. Some analysts use "no-price" methods by using a food Engel curve to derive the deflator as that needed for nominally similar households to have equal food shares in all regions and time periods. This method cannot be tested in countries where it is used as a spatial deflator since they lack suitable price data. In this paper, data from Vietnam are used to test this method against benchmarks provided by multilateral price indexes calculated from repeated spatial price surveys. Deflators from a food Engel curve appear to be a poor proxy for deflators obtained from multilateral price indexes. To the extent that such price indexes reliably compare real living standards over time and space, these results suggest that estimates of the level, location, and change in poverty and inequality would be distorted if the Engel method deflator was used in their stead.
| Main Authors: | , , |
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| Format: | Working Paper biblioteca |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2017-06
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| Subjects: | ENGEL CURVES, DEFLATION, FOOD PRICES, INEQUALITY, POVERTY, |
| Online Access: | http://documents.worldbank.org/curated/en/359921497011026208/Prices-Engel-curves-and-time-space-deflation-impacts-on-poverty-and-inequality-in-Vietnam https://hdl.handle.net/10986/27297 |
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| Summary: | Many developing countries lack spatially
disaggregated price data. Some analysts use
"no-price" methods by using a food Engel curve to
derive the deflator as that needed for nominally similar
households to have equal food shares in all regions and time
periods. This method cannot be tested in countries where it
is used as a spatial deflator since they lack suitable price
data. In this paper, data from Vietnam are used to test this
method against benchmarks provided by multilateral price
indexes calculated from repeated spatial price surveys.
Deflators from a food Engel curve appear to be a poor proxy
for deflators obtained from multilateral price indexes. To
the extent that such price indexes reliably compare real
living standards over time and space, these results suggest
that estimates of the level, location, and change in poverty
and inequality would be distorted if the Engel method
deflator was used in their stead. |
|---|