Adjusting Inequalities for Regional Price Parities: Importance and Implications

I have a new working paper available, this time with my friend Youcef Msaid. In this paper, we recalculate the different gini coefficients of US states in 2012 with and without the regional price parity deflators provided by the Bureau of Economic Analysis. We argue that the level of inequality is moderately lower but that the spatial distribution of the bottom income decile is dramatically different. The abstract is below and the paper can be consulted here on SSRN:

Corrections to CPS data dramatically change the geographic distribution of the top and bottom deciles of the income distribution. We correct the measure of real personal and household income with regional price indices from BEA. Uncorrected figures have poorer states overrepresented in the bottom decile, while corrected figures have much of that decile living in urban areas in NY and CA. We draw policy-relevant conclusions from these facts, mostly with regard to housing policy.

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