Improving the ACCRA U.S. regional cost of living index

Article type: Research Article

Authors: Phillips, Keith R.^{a; *} | Daly, Christina^a

Affiliations: [a] Federal Reserve Bank of Dallas, San Antonio, TX, USA

Correspondence: [*] Corresponding author: Tel.: +1 210 978 1409; E-mail: keith.r.phillips@dal.frb.org

Abstract: The broadest and most commonly used measure of the cost of living across U.S. cities is the American Chamber of Commerce Research Association (ACCRA) index. This index is used by business and government organizations and the media to rank living standards and real wages across U.S. cities. In this study we reduce the aggregation bias in the index by calculating national average prices for the 59 item prices using population weights instead of the equal weight formula used by ACCRA. This correction results in a decline in the index values for all cities and changes in the rankings and bi-variate comparisons between city pairs. In some high-cost cities the index values decrease by over 25 percent, and in 74 percent of the cities the rank changes by greater than one spot.

Keywords: Cost of living index, population weighting, regional data

DOI: 10.3233/JEM-2010-0328

Journal: Journal of Economic and Social Measurement, vol. 35, no. 1-2, pp. 33-42, 2010