ESTIMATING SPATIAL CONSUMER PRICE INDICES THROUGH ENGEL CURVE ANALYSIS

Abstract

In this paper we propose a method of estimating spatial multilateral price index numbers from cross‐section consumer expenditure data on different items using Engel curve analysis. The novelty of the procedure is that it overcomes the problem of data inadequacy, a problem that is shared by most of the developing countries. The procedure does not require item‐specific price/unit value data and price index numbers can be calculated from consumer expenditure data grouped by per capita income/total consumer expenditure class in a situation where unit level data are not available. To illustrate the method, we use published state‐specific data of the 50th round (1993–94) and 55th round (1999–2000) consumer expenditure surveys of India's National Sample Survey Organization (NSSO) and calculate the spatial consumer price index numbers for 15 major states of India, with All‐India taken as base, separately for the rural and the urban sector for each round.