Adjusting Inequalities for Regional Price Parities: Importance and Implications

Abstract

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.

Keywords: Regional price parities, inequality, spatial distribution

JEL Classification: R50, R53