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2005-2009 Regional Price Parities

2005-2009 Regional Price Parities. Bettina Aten, Eric Figueroa, and Troy Martin Bureau of Economic Analysis AUBER 2011 Fall Conference October 8-11, 2011. Regional Price Parities (RPPs). Spatial price indexes that reflect price level differences across regions for a specified time period:

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2005-2009 Regional Price Parities

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  1. 2005-2009Regional Price Parities Bettina Aten, Eric Figueroa, and Troy Martin Bureau of Economic Analysis AUBER 2011 Fall Conference October 8-11, 2011

  2. Regional Price Parities (RPPs) • Spatial price indexes that reflect price level differences across regions for a specified time period: • Temporal Price Indexes: across time for a specified region • Useful for comparing economic data, such as consumption expenditures and income levels: • BEA currently does not adjust regional data for differences in price levels across regions. • RPPs are a first step in that direction. • RPPs are experimental estimates based on BLS and Census data.

  3. Overview • RPPs show percent difference in price levels: • Across regions • For one specified time period • Price level across all regions and expenditures equals 100 * Includes Washington, DC.

  4. Overview • RPPs show percent difference in price levels: • Average price level in Hawaii is 18.5% higher than the national average. 118.5 / 100 = 1.185 * Includes Washington, DC.

  5. Overview • RPPs show percent difference in price levels: • Average price level in Hawaii is 18.5% higher than the national average. 118.5 / 100 = 1.185 • Average price level of goods in Hawaii is 15.8% higher than in South Dakota. 106.3 / 91.8 = 1.158 * Includes Washington, DC.

  6. Input Data: Expenditures Share of household expenditures, for 16 expenditure classes (2005-2009)

  7. Results: Metro, Micro and Rural Areas

  8. Results: States

  9. Using RPPs to Adjust Data Controls for differences in regional price levels: 54.6 / 31.2 = 1.75 Unadjusted PI is 75% higher in Hawaii than in South Dakota. After adjustment, PI is only 24% higher in Hawaii. 46.1 / 37.3 = 1.24 * Includes Washington, DC.

  10. Data Adjustment Procedure * Includes Washington, DC.

  11. Data Adjustment Procedure Divide data by RPP/100 Alaska: 30.2 / 1.081 = 27.9 * Includes Washington, DC.

  12. Data Adjustment Procedure Divide data by RPP/100 Alaska: 30.2 / 1.081 = 27.9 Calculate Balancing Factor = Σ result / Σ unadjusted PI 12,149.4 / 12,168.2 = 0.998461 * Includes Washington, DC.

  13. Data Adjustment Procedure Divide data by RPP/100 Alaska: 30.2 / 1.081 = 27.9 Calculate Balancing Factor = Σ result / Σ unadjusted PI 12,149.4 / 12,168.2 = 0.998461 Divide by Balancing Factor Alaska: 27.9 /.998461 = 28.0 * Includes Washington, DC.

  14. Balancing Factor (BF) Adjustment Need arises due to distributional differences in data: * Includes Washington, DC.

  15. Balancing Factor (BF) Adjustment • Need arises due to distributional differences in data: • Small impact: 0.15% increase • BF may be unavailable: ex. average salaries by state • If so, simply divide by RPP/100 to adjust data BF Adjust. (%) +0.15% * Includes Washington, DC.

  16. RPPs on the BEA website: www.bea.gov Research at BEA > Browse by Topic > Price Indexes

  17. BEA Working Papers • 2005-2009 excel tables include these data: * As defined by the Office of Management and Budget

  18. 2005-09 Regional Price Parities RPP Program email: rpp@bea.gov Eric Figueroa Regional Price Parities Bureau of Economic Analysis (202) 606-9328 Eric.Figueroa@bea.gov

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