2005-2009 Regional Price Parities

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2005-2009Regional Price Parities

Bettina Aten, Eric Figueroa, and Troy MartinBureau of Economic Analysis

AUBER 2011 Fall ConferenceOctober 8-11, 2011

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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.

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Overview

RPPs show percent difference in price levels: Across regions For one specified time period

Price level across all regions and expenditures equals 100

Selected States

2005-09 Regional Price Parities

Overall Goods Services

Alaska 108.1 102.5 111.7

Hawaii 118.5 106.3 125.5

Indiana 90.8 96.4 87.9

South Dakota 83.8 91.8 79.4

All States * 100.0 99.3 100.4* Includes Washington, DC.

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Overview

RPPs show percent difference in price levels:

Selected States



Alaska 108.1 102.5 111.7

Hawaii 118.5 106.3 125.5

Indiana 90.8 96.4 87.9


All States * 100.0 99.3 100.4

118.5 / 100 = 1.185

* Includes Washington, DC.

Average price level in Hawaii is 18.5% higher than the national average.

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Overview

RPPs show percent difference in price levels:

Selected States



Alaska 108.1 102.5 111.7

Hawaii 118.5 106.3 125.5

Indiana 90.8 96.4 87.9


All States * 100.0 99.3 100.4

118.5 / 100 = 1.185


106.3 / 91.8 = 1.158

Average price level in Hawaii is 18.5% higher than the national average.

Average price level of goods in Hawaii is 15.8% higher than in South Dakota.

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Input Data: Expenditures

Share of household expenditures, for 16 expenditure classes(2005-2009)

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Results: Metro, Micro and Rural Areas

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Results: States

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46.1 / 37.3 = 1.24

Using RPPs to Adjust Data

Controls for differences in regional price levels:

Personal Income (PI), 2009(billions $)

State RPP Unadjusted PI

Adjusted PI

Alaska 108.1 30.2 28.0

Hawaii 118.5 54.6 46.1

Indiana 90.8 218.5 241.0


All States* 100.0 12,168.2


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.

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Data Adjustment Procedure



Adjusted PI

Alaska 108.1 30.2 28.0

Hawaii 118.5 54.6 46.1

Indiana 90.8 218.5 241.0


All States* 100.0 12,168.2 12,168.2


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Divide by RPP/100

Adjusted PI

Alaska 108.1 30.2 27.9 28.0

Hawaii 118.5 54.6 46.1 46.1

Indiana 90.8 218.5 240.7 241.0

South Dakota 83.8 31.2 37.2 37.3

All States* 100.0 12,168.2 12,149.4 12,168.2


Alaska: 30.2 / 1.081 = 27.9

Divide data by RPP/100

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Divide by RPP/100

Balancing Factor (BF)

Adjusted PI

Alaska 108.1 30.2 27.9 0.998461 28.0

Hawaii 118.5 54.6 46.1 0.998461 46.1

Indiana 90.8 218.5 240.7 0.998461 241.0

South Dakota 83.8 31.2 37.2 0.998461 37.3

All States* 100.0 12,168.2 12,149.4 0.998461 12,168.2


12,149.4 / 12,168.2 = 0.998461

Alaska: 30.2 / 1.081 = 27.9


Calculate Balancing Factor = Σ result / Σ unadjusted PI

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Divide by RPP/100


Adjusted PI(divide by BF)

Alaska 108.1 30.2 27.9 0.998461 28.0

Hawaii 118.5 54.6 46.1 0.998461 46.1

Indiana 90.8 218.5 240.7 0.998461 241.0

South Dakota 83.8 31.2 37.2 0.998461 37.3

All States* 100.0 12,168.2 12,149.4 0.998461 12,168.2


Alaska: 27.9 /.998461 = 28.0

12,149.4 / 12,168.2 = 0.998461

Alaska: 30.2 / 1.081 = 27.9


Calculate Balancing Factor = Σ result / Σ unadjusted PI

Divide by Balancing Factor

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Balancing Factor (BF) Adjustment

Need arises due to distributional differences in data:



Divide by RPP/100



Alaska 108.1 30.2 27.9 0.998461 28.0

Hawaii 118.5 54.6 46.1 0.998461 46.1

Indiana 90.8 218.5 240.7 0.998461 241.0

South Dakota 83.8 31.2 37.2 0.998461 37.3

All States* 100.0 12,168.2 12,149.4 0.998461 12,168.2


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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



Divide by RPP/100



Alaska 108.1 30.2 27.9 0.998461 28.0

Hawaii 118.5 54.6 46.1 0.998461 46.1

Indiana 90.8 218.5 240.7 0.998461 241.0

South Dakota 83.8 31.2 37.2 0.998461 37.3

All States* 100.0 12,168.2 12,149.4 0.998461 12,168.2


BFAdjust.

(%)

+0.15%

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RPPs on the BEA website: www.bea.gov

Research at BEA > Browse by Topic > Price Indexes

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2005-2009 excel tables include these data:

BEA Working Papers

RegionMetropolitan, Micropolitan

and Rural Areas*

50 States

and D.C.

366 Metropolitan

Areas *

RPPs

Overall Yes Yes Yes

Goods vs. Services Yes Yes Yes

16 Classes Yes Yes No

Adjusted Data

Per Capita Personal Income

No Yes Yes

* As defined by the Office of Management and Budget

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RPP Program email: [email protected]

Eric FigueroaRegional Price Parities

Bureau of Economic Analysis(202) 606-9328

[email protected]

2005-2009 Regional Price Parities

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