Abstract
The previous chapters have provided the concepts, analytical framework and alternative methodologies for measuring price changes and examining their implications for household welfare. In this chapter, we describe a selection of empirical studies, mostly on India , that implement these concepts and methodologies in measuring price changes and in providing evidence on their distributive impact on household welfare. The selected studies highlight the following aspects of price changes: (a) the effect of inflation on inequality and poverty, (b) spatial differences in prices and their changes in a large heterogeneous country such as India and Canada , (c) the link between preference specification and price measurement and (d) empirical evidence on the sensitivity of welfare conclusions to the assumed demand functional form.
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Notes
- 1.
See the recently published revised edition of the widely used collection of essays in ‘Poverty and Income Distribution in India’ edited earlier by Srinivasan and Bardhan and now re-edited by Banerjee et al. (2017) for an account of the early contributions by Indian researchers on inequality and poverty.
- 2.
The material in this subsection is based on Mishra and Ray (2011).
- 3.
- 4.
Since the prices are normalised at unity in the base round 50, the nominal and real expenditure shares are the same in that round. This remark also holds for inequality and poverty rates.
- 5.
θ = 0 implies that household expenditures are uncorrected for differences in household size and composition, 0 < θ < 1 implies consumption economies of scale that favour larger sized households, while θ > 1 implies diseconomies that favour smaller-sized households.
- 6.
The poverty line for the expenditure calculations based on the four included items were obtained by multiplying the official poverty lines by the median Engel ratios of the four included items to total expenditure.
- 7.
This is explained by the higher price increases in the ‘Miscellaneous’ category compared to the other items along with the fact that the budget share of this composite item has also increased significantly over this period. The nominal expenditure poverty rates that are based on the official poverty lines do not take into account these changes in the expenditure pattern and the relative prices unlike the real expenditure poverty rates that do.
- 8.
See Meenakshi and Ray (2002) for previous evidence from India, Lanjouw and Ravallion (1995) for evidence from Pakistan and Lancaster, Ray and Valenzuela (1999) for cross-country evidence from a range of developing and developed countries on the sensitivity of the poverty estimates to household size economies in consumption.
- 9.
Typically, two-thirds or more of the households have two or more adults and 1 or more children.
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Ray, R. (2018). Selected Empirical Studies on Prices and Their Welfare Applications. In: Household Behaviour, Prices, and Welfare. Themes in Economics. Springer, Singapore. https://doi.org/10.1007/978-981-13-1930-3_5
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