The Journal of Economic Inequality

, Volume 13, Issue 3, pp 449–464 | Cite as

When do relative prices matter for measuring income inequality? The case of food prices in Mozambique

Open Access
Article

Abstract

Changes in relative prices of commodities consumed in different shares across income groups can be expected to alter real income differentials between these groups. Using Mozambican household budget survey and price data from 2002/03 and 2008/09, we show that once relative price increases are accounted for, inequality of real consumption increases substantially. We obtain this result by constructing a price deflator that reflects divergent price dynamics of different product categories. Since the main factors driving this result prevail in other developing countries, it is likely that inequality may be underestimated elsewhere.

Keywords

Relative price changes Price index Income inequality Mozambique 

Supplementary material

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Copyright information

© Springer Science+Business Media New York 2015

Authors and Affiliations

  1. 1.World Institute for Development Economics ResearchUnited Nations UniversityHelsinkiFinland
  2. 2.Development Economics Research Group, Department of EconomicsUniversity of CopenhagenCopenhagenDenmark

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