Estimating a CPI-based regional price parity index for US cities

Steven Bond-Smith and Younghan Lee
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Younghan Lee: University of Hawai‘i at MÄ noa, Department of Economics

No 2025-2, Working Papers from University of Hawaii Economic Research Organization, University of Hawaii at Manoa

Abstract: We use metropolitan area Consumer Price indexes (CPI) and the US CPI to calculate a CPI-based Regional Price Parity index (CPI-based RPP) for the 29 US cities with CPIs published by the Bureau of Labor Statistics. This CPI-based RPP can be used (along with the US CPI) to make fair comparisons of economic performance in US cities (over time) at comparable (and constant) prices for any period with published CPI data. The Bureau of Economic Analysis (BEA) publishes a similar PCE Price Index-based Regional Price Parity Index (BEA RPP), but the BEA RPP is only published annually back to 2008, with a year delay. Prior to our project, there was no suitable price comparison index for adjusting economic data for geographic price differences in periods outside this range or with more frequent observations. We draw on the properties of price parity indexes to estimate our CPI-based RPP. This requires estimating average relative CPI price levels for a known period, re-leveling CPIs to be consistent with average relative levels in the known period, and calculating the CPI-based RPP for any period based on relative re-leveled local and national CPIs. This results in a CPI-based RPP for any period with published CPI data, as far back as 1913 in some cities through to the most recent CPI observations. We demonstrate the index by exploring regional price trends and examining real per capita GDP and real per capita personal income at constant and comparable prices.

Keywords: Regional Price Parity; Geographic price differences; Consumer Price Index; Cost-of-living (search for similar items in EconPapers)
Pages: 29 pages
Date: 2025-09
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