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Faculty of Economics

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Crossley, T. F. and Pendakur, K.

The common-scaling social cost-of-living index

Journal of Business and Economic Statistics

Vol. 28(FAVOURITE 3 (FOR CROSSLEY)) no. 4 pp. 523-538 (2010)

Abstract: If preferences or budgets are heterogeneous across people (as they clearly are), then individual cost-of-living indexes are also heterogeneous. Thus, any social cost-of-living index faces an aggregation problem. In this article, we provide a solution to this problem that we call a “common-scaling” social cost-of-living index (CS-SCOLI). In addition, we describe nonparametric methods for estimating such social cost-of-living indexes. As an application, we consider changes in the social cost-of-living in the U.S. between 1988 and 2000.

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