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Is the United States CPI Biased Across Income and Age Groups?

S. Nuri Erbas
International Monetary Fund (IMF) - Middle East and Central Asia Department

Chera L. Sayers
Independent

September 1998

IMF Working Paper No. 98/136

Abstract:
The recent Boskin Commission Report (1996) underscores a significant upward bias in CPI measurement in the United States. This may result in excessive cost-of-living adjustment (COLA) of some entitlements in the federal budget because COLA is indexed to CPI. This paper presents some evidence that overall CPI may be biased against lower income elderly households, the primary beneficiaries of COLA. Although a downward adjustment in CPI resulting in an across-the-board cut in COLA of entitlements may yield significant budgetary savings, it may result in a deterioration in income distribution against lower income elderly households.

Keywords: CPI, COLA, income brackets, age groups

JEL Classifications: E31, H53, H55

Working Paper Series

Date posted: February 15, 2006 ; Last revised: February 15, 2006

Suggested Citation

Erbas, S. Nuri and Sayers, Chera L., Is the United States CPI Biased Across Income and Age Groups? (September 1998). IMF Working Paper, Vol. , pp. 1-34, 1998. Available at SSRN: http://ssrn.com/abstract=882696

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Contact Information

S. Nuri Erbas (Contact Author) International Monetary Fund (IMF) - Middle East and Central Asia Department ( email ) 700 19th Street, N.W. Washington, DC 20431 United States
Chera L. Sayers Independent ( email ) 11750 Owens Glen Way North Potomac, MD 20878 United States