Measuring the Cost of Living in Mexico and the U.S.
- American Economic Journal: Macroeconomics (Forthcoming)
We use a dataset with prices and spending on consumer packaged goods matched at
the barcode-level across the US and Mexico to measure the price index in Mexico
relative to the US. Mexican prices relative to the US are 23% lower compared to the
International Comparisons Project’s (ICP) price index. We decompose the 23% gap
into the biases from imputation, sampling, quality, and variety. Quality bias increases
Mexican prices by 48%. Imputation, sampling, and variety bias lowers Mexican prices
by 11%, 13%, and 33%, respectively.
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