Econometrica: Jan 1990, Volume 58, Issue 1

On Calculating Cost-of-Living Index Numbers for Arbitrary Income Levels

https://doi.org/0012-9682(199001)58:1<75:OCCINF>2.0.CO;2-M
p. 75-92

Bert M. Balk

We 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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