This report describes the estimation of differences in price levels across 38 geographic areas in the United States. It is based on prices collected for the 2003 Consumer Price Index (CPI) comprising eight expenditure components: Apparel, Education, Food and Beverages, Housing, Medical Goods and Services, Recreation, Transport and Other Goods and Services. The geographic areas represent large metropolitan areas and combinations of smaller PSUs (primary sampling units) that are urban but not metropolitan, such as Bend in Oregon. This research follows the work of Kokoski, Moulton and Zieschang (1999) on interarea price levels that referred to the year 1989. One difference from the earlier studies is the procedure used in estimating the average prices of detailed items. A second difference is that an overall price level for all goods and services is presented, in addition to the price level for each of the component headings. The third difference is in the aggregation method, a relatively simple and transparent one that has been recently used in the international price comparison literature, the weighted Country Product Dummy (CPD) method [Deaton, Friedman, Alatas (2004), Sergey (2004), Diewert (2002), Rao (2002) and Selvanathan and Rao (1994), Silver (2004)].
JEL Code(s) C43 Published