Goods Prices and Availability in Cities

Jessie Handbury and David Weinstein

No 17067, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper uses detailed barcode data on purchase transactions by households in 49 U.S. cities to overcome a large number of problems that have plagued spatial price index measurement. We identify two important sources of bias. Heterogeneity bias arises from comparing different goods in different locations, and variety bias arises from not correcting for the fact that some goods are unavailable in some locations. Eliminating heterogeneity bias causes 97 percent of the variance in the price level of food products across cities to disappear relative to a conventional index. Eliminating both biases reverses the common finding that prices tend to be higher in larger cities. Instead, we find that price level for food products falls with city size.

JEL-codes: L81 R12 R13 (search for similar items in EconPapers)
Date: 2011-05
New Economics Papers: this item is included in nep-geo and nep-ure
Note: ITI
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Citations: View citations in EconPapers (32)

Published as Jessie Handbury & David E. Weinstein, 2015. "Goods Prices and Availability in Cities," Review of Economic Studies, Oxford University Press, vol. 82(1), pages 258-296.

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Journal Article: Goods Prices and Availability in Cities (2015)
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