American Economic Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
Measuring the Cost of Living in Mexico and the United States
American Economic Journal: Macroeconomics
vol. 15,
no. 3, July 2023
(pp. 43–63)
Abstract
We use a dataset with prices and spending on consumer packaged goods matched at the bar code level across the United States and Mexico to measure the price index in Mexico relative to the United States. Mexican prices relative to the United States are 23 percent lower compared to the International Comparisons Project's (ICP) price index. We decompose the 23 percent gap into the biases from imputation, sampling, quality, and variety. Quality bias increases Mexican prices by 48 percent. Imputation, sampling, and variety bias lowers Mexican prices by 11 percent, 13 percent, and 33 percent, respectively.Citation
Argente, David, Chang-Tai Hsieh, and Munseob Lee. 2023. "Measuring the Cost of Living in Mexico and the United States." American Economic Journal: Macroeconomics, 15 (3): 43–63. DOI: 10.1257/mac.20200486Additional Materials
JEL Classification
- C43 Index Numbers and Aggregation; leading indicators
- E31 Price Level; Inflation; Deflation
- I31 General Welfare; Well-Being
- O11 Macroeconomic Analyses of Economic Development
- O12 Microeconomic Analyses of Economic Development
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