Econometrica: Jan 1990, Volume 58, Issue 1
On Calculating Cost-of-Living Index Numbers for Arbitrary Income Levels
Bert M. BalkWe present a method for calculating cost-of-living index numbers for arbitrary base period income levels without using heavy econometric estimation methods. The second order approximation formulas contain parameters which can easily be estimated by a differential demand system. Using a suitable specification, it is possible to work at a low level of commodity aggregation. The method is demonstrated on Netherlands data for the period 1952-1981.
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