Journal Article

Calculating Rural-Urban Food Price Differentials from Unit Values in Household Expenditure Surveys: A Comparison with Existing Methods and A New Procedure

Amita Majumder, Ranjan Ray and Kompal Sinha

in American Journal of Agricultural Economics

Published on behalf of Agricultural and Applied Economics Association

Volume 94, issue 5, pages 1218-1235
Published in print October 2012 | ISSN: 0002-9092
Published online July 2012 | e-ISSN: 1467-8276 | DOI: https://dx.doi.org/10.1093/ajae/aas064
Calculating Rural-Urban Food Price Differentials from Unit Values in Household Expenditure Surveys: A Comparison with Existing Methods and A New Procedure

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  • Econometric and Statistical Methods and Methodology: General
  • Household Behaviour and Family Economics
  • Urban, Rural, and Regional Economics
  • Prices, Business Fluctuations, and Cycles
  • Household Analysis

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While purchasing power parity (PPP) between countries has received a great deal of attention, PPP calculations within countries have received less attention. The idea that one unit of currency has the same purchasing power in all regions in large countries is false. This paper addresses this limitation by proposing a methodology for calculating rural-urban PPP in India. The paper introduces a concept of item-specific PPP that exploits the analogy with an item-specific equivalence scale. The methodology relies on demographically-varying preferences to estimate PPP. The results underline the need to incorporate spatial differences in PPP calculations in countries with heterogeneous preferences.

Keywords: CPD Model; Spatial Prices; Unit Values; Quality Adjustment; C13; D12; E30; R10; R20

Journal Article.  9385 words.  Illustrated.

Subjects: Econometric and Statistical Methods and Methodology: General ; Household Behaviour and Family Economics ; Urban, Rural, and Regional Economics ; Prices, Business Fluctuations, and Cycles ; Household Analysis

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