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On a Method of Calculating Regional Price Differentials with Illustrative Evidence from India by

By D. Coondoo, A. Majumder and R. Ray


Acknowledgments: The authors are grateful to Professors Nikhilesh Bhattacharya and Probal Chaudhuri for their helpful advice during the work on this paper. The authors, also, thank Geoffrey Lancaster for his painstaking and skilful research assistance. Ranjan Ray acknowledges the financial assistance from an Australian Research Council (Large) Grant. The disclaimer applies. In this paper we propose a method of estimating multilateral regional price index numbers from a given household level data set on item-wise unit values/prices. The method is closely related to the Country-Product Dummy variable model of Summers (1973). This method is likely to be particularly useful in studies of regional comparisons of poverty and inequality, optimal commodity taxes and tax reforms. To illustrate the method, we use it to calculate the regional consumer price index numbers for Eastern, Western and Southern India (taking Northern India as the reference region) separately for three categories of rural and urban households, viz., all households and those below and above the poverty line, using household level unit records of the NSS 50 th round (1993–94) Consumer Expenditure Survey

Topics: Key words, Regional price differentials, Multilateral index numbers, Country-Product Dummy model
Year: 2001
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