EconPapers    
Economics at your fingertips  
 

A New Engel on Price Index and Welfare Estimation

David Atkin (), Benjamin Faber, Thibault Fally () and Marco Gonzalez-Navarro ()

No 26890, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Measuring changes in welfare, and particularly the price index, is challenging in the absence of well-measured prices covering the entire consumption basket. We propose and implement a new approach to estimate changes in income-group specific price indices and welfare using rich, but widely available, expenditure survey microdata. We build on existing work that uses Engel curves and expenditures on income-elastic goods to infer real incomes. While based on non-homothetic preferences, the price indices this approach recovers are homothetic and hence are neither theory consistent nor suitable for distributional analysis. We show that we can recover income-specific price index and welfare changes from horizontal shifts in Engel curves if preferences are quasi-separable and we focus on “relative” Engel curves. Our approach is flexible enough to allow for the non-linear Engel curves we document in the data, and for non-parametric estimation at each point of the income distribution. We implement this approach to estimate inflation and welfare in rural India between 1987/1988 and 1999/2000, and to revisit the impacts of India's trade reforms. Our estimates reveal that lower inflation rates for the rich erased the real income convergence documented by the existing literature that calculates inflation using only well-measured prices.

JEL-codes: D12 E31 F63 O12 (search for similar items in EconPapers)
Date: 2020-03
Note: DEV EFG ITI
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://www.nber.org/papers/w26890.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

Related works:
Working Paper: A New Engel on Price Index and Welfare Estimation (2020) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:26890

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w26890
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2020-10-21
Handle: RePEc:nbr:nberwo:26890