AN ALMOST IDEAL COST OF LIVING INDEX

FOR FOOD IN SPAIN USING A

MICROECONOMIC APPROACH AND
CENSORED DATA

Authors: Elena Lasarte Navamuel, Dusan Paredes

Araya & Esteban Fernández Vázquez
Published online: 01 Sep 2015.

Journal Spatial Economic Analysis

REVIEW OF STUDY
STRUCTURE OF PRESENTATION
1 MOTIVATION AND RESEARCH PROBLEM
1 MOTIVATION AND RESEARCH PROBLEM
o
The research paradigm

o
o
The empirical gap
o

o The proposal of research

2 OBJECT AND HYPHOTESIS
2 OBJECTIVE AND HYPOTHESIS
o
The research paradigm

The objective of research

2 OBJECTIVE AND HYPOTHESIS
o
o Consideration
o

Hypothesis and arguments

Contribution
 METHODOLOGICAL APPROACH (ECONOMIC
3 MODELLING, METHOD AND DATA)
3 METHOD AND DATA
o
o

o
o

o
o
o
o
3 METHOD AND DATA: ECONOMIC MODELLING
o

𝑐(𝑝ℎ ,𝑢)
𝑆𝐶𝑂𝐿ℎ𝑟 =
𝑐(𝑝𝑟 ,𝑢)

◦𝑐
◦ 𝑝ℎ 𝑝𝑟

◦
3 METHOD AND DATA: ECONOMIC MODELLING
o
o
o
o

𝑛 𝑛 𝑛
1 𝛽
log 𝑐 𝑝, 𝑢 = 𝛼0 + ෍ 𝛼𝑖 log 𝑝𝑖 + ෍ ෍ 𝛾𝑖𝑗 log 𝑝𝑖 + 𝑢𝛽𝑜 ෑ 𝑝𝑖 𝑖
2
𝑖=1 𝑖=1 𝑗=1 𝑖

◦
3 METHOD AND DATA: ECONOMIC MODELLING
o
o
𝑛
𝑥
𝑤𝑖 = 𝛼𝑖 + ෍ 𝛾𝑖𝑗 log 𝑝𝑗 + 𝛽𝑖 log{ }
𝑃
𝑗=1
◦
◦
◦
◦
◦𝛼, 𝛽 𝑎𝑛𝑑 𝛾
◦
◦
1
𝑙𝑜𝑔 𝑃 = 𝛼0 + σ𝑛𝑗=1 𝛾𝑖𝑗 log 𝑝𝑗 + σ𝑛𝑖=1 σ𝑛𝑗=1 𝛾𝑖𝑗 log 𝑝𝑖 log 𝑝𝑗
2
3 METHOD AND DATA: ECONOMIC MODELLING

▫ (σ𝑛𝑖=1 𝑤𝑖 = 1)
▫σ𝑛𝑖=1 𝛼𝑖 = 1
▫σ𝑛𝑖=1 𝛾𝑖 = 1
▫σ𝑛𝑖=1 𝛽𝑖 = 0
◦
◦

▫σ𝑛𝑖=1 𝛾𝑗𝑖 = 0
◦
▫ 𝛾𝑖𝑗 = 𝛾𝑗𝑖
3 METHOD AND DATA: ECONOMIC MODELLING

▫
▫
𝜙(𝑥
Φ x

𝑛
𝑥
𝑤𝑖 = ϕ x αi + ෍ 𝛾𝑖𝑗 log 𝑝𝑗 + 𝛽𝑖 log{ } + ෍ 𝜄𝑘 𝑅𝑘 + 𝛿 Φ(x)
𝑃
𝑗=1 𝑘

𝜄𝑘
𝛿
◦
4 ESTIMATES AND RESULTS
4 ESTIMATES AND RESULTS
▫PROBIT model: all the socio-
economic variables are significant at
the 1% level;

▫SCOL Index:
the cost in food products required to
attain the same utility level as the
median household in Madrid is around
20% lower for the median household in
Castile-La Mancha;
this utility level for the equivalent
households living in Catalonia is 8.8%
more expensive.
4 ESTIMATES AND RESULTS
Table 2. Comparison of the SCOL index with different utility levels
▫a positive correlation SCOL index
Income per
Region SCOL index (1) capita 2010,
between the COL figures (2)
Euros (3)
Andalusia 0.9390 0.9366 17,299
estimated and the income Aragon 0.9896 0.9905 25,33
level; Asturias 0.8752 0.8768 21,209
Balearic Islands 0.9822 0.9802 24,039
▫The three rich regions are Basque Country 10.334 10.333 19,494
Canary Islands 10.268 10.224 22,16
those with the highest SCOL Cantabria 0.9480 0.9501 22,001
Castile-La Mancha 0.7960 0.7958 18,144
indices, and vice-versa; Castile Leon 0.8485 0.8489 26,635
Catalonia 10.882 10.871 20,15
Extremadura 0.9075 0.9044 15,857
Galicia 0.8515 0.8507 20,625
La Rioja 0.9693 0.9720 29,578
Madrid 10.000 10.000 19,003
Murcia 10.719 10.719 28,866
Navarra 10.677 10.671 30,156
Valencia 0.9918 0.9912 25,276
Correlation coefficient SCOL/
0.3594 0.3693
Income per capita
4 ESTIMATES AND RESULTS
Table 2. Comparison of the SCOL index with different utility levels
▫A positive correlation between SCOL index
Income per
Region SCOL index (1) capita 2010,
the COL figures estimated and (2)
Euros (3)
Andalusia 0.9390 0.9366 17,299
the income level; Aragon 0.9896 0.9905 25,33
Asturias 0.8752 0.8768 21,209
▫The three rich regions are Balearic Islands 0.9822 0.9802 24,039
those with the highest SCOL Basque Country 10.334 10.333 19,494
Canary Islands 10.268 10.224 22,16
indices, and vice-versa; Cantabria 0.9480 0.9501 22,001
Castile-La Mancha 0.7960 0.7958 18,144
▫The differentials in the COL Castile Leon 0.8485 0.8489 26,635
among Spanish regions depend Catalonia
Extremadura
10.882
0.9075
10.871
0.9044
20,15
15,857
on different consumption Galicia 0.8515 0.8507 20,625
La Rioja 0.9693 0.9720 29,578
patterns and substitution Madrid 10.000 10.000 19,003
among regions. Murcia
Navarra
10.719
10.677
10.719
10.671
28,866
30,156
Valencia 0.9918 0.9912 25,276
Correlation coefficient SCOL/
0.3594 0.3693
Income per capita
4 CONCLUSIONS
▫ Policies designed to alleviate regional income disparities that do not
consider potential geographical differences in COL;

▫SCOL accounts only for the cost of food, the SCOL- adjusted wages can
provide a more accurate approximation to regional differentials on wages
than a simple comparison of nominal wages;

▫The author’s assume the limitation in considering one year and just food,
but affirm if the approach allows comparisons of living standards across
regions from a different perspective.
4 COMMENTS
▫ A set of foods;

▫Household income is allocation;

▫Sensibility and elasticities;

▫Pattern of consumption and regional characteristics;

▫SCOL and nominal wages;

▫SCOL, economy theory and public policy

 AN ALMOST IDEAL COST OF LIVING INDEX
FOR FOOD IN SPAIN USING A
MICROECONOMIC APPROACH AND
CENSORED DATA

Authors: Elena Lasarte Navamuel, Dusan Paredes

Araya & Esteban Fernández Vázquez
Published online: 01 Sep 2015.

Journal Spatial Economic Analysis

REVIEW OF STUDY