American Economic Journal: Macroeconomics
no. 3, July 2023
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.
Argente, David, Chang-Tai Hsieh, and Munseob Lee.
"Measuring the Cost of Living in Mexico and the United States."
American Economic Journal: Macroeconomics,
Index Numbers and Aggregation; leading indicators
Price Level; Inflation; Deflation
General Welfare; Well-Being
Macroeconomic Analyses of Economic Development
Microeconomic Analyses of Economic Development