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Spatial Price Differences in China: Estimates and Implications

Loren Brandt () and Carsten Holz ()

Microeconomics from EconWPA

Abstract: Prices differ across space: from province to province, from rural (or urban) areas in one province to rural (or urban) areas in another province, and from rural to urban areas within one province. Systematic differences in prices across a range of goods and services in different localities imply regional differences in the costs of living. If high- income provinces also have high costs of living, and low-income provinces have low costs of living, the use of nominal income measures in explaining such economic outcomes as inequality can lead to misinterpretations. Income should be adjusted for costs of living. We are interested in the sign and magnitude of the adjustments needed, their changes over time, and their impact on economic outcomes in China. In this article, we construct a set of (rural, urban, total) provincial- level spatial price deflators for the years 1984-2002 that can be used to obtain provincial-level income measures adjusted for purchasing power. We provide illustrations of the significant effect of ignoring spatial price differences in the analysis of China’s economy.

Keywords: spatial deflators; inequality; income differences; regional absolute price levels; China (search for similar items in EconPapers)
JEL-codes: D3 D31 C43 D63 O18 O53 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cna, nep-dev, nep-geo, nep-tra and nep-ure
Date: 2005-12-02
Note: Type of Document - pdf; pages: 50
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http://econwpa.repec.org/eps/mic/papers/0512/0512001.pdf (application/pdf)

Related works:
Journal Article: Spatial Price Differences in China: Estimates and Implications (2006) Downloads
Journal Article: Spatial Price Differences in China: Estimates and Implications (2006) Downloads
Working Paper: Spatial Price Differences in China: Estimates and Implications (2005) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpmi:0512001

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