Spatial Price Index
Spatial Price Index
Despite the importance of the CPI and all the discussion about it one of the things we do not have is data to compare the price of living in one city or state as compared to another.
Well the Federal statisticians are working on it and the BEA just published a working paper by Bettina H Aten on Estimates of State and Metropolitan Price Levels for Consumption Goods and Services in the United States, 2005 http://www.bea.gov/papers/pdf/aten_estimates_state_metro_2005.pdf
The paper construction Spatial Price Indices (SPI) for the 50 states and Washington, D.C..
Moreover, in the index is also publishes a SPI for some 363 Metropolitan Statistical Areas.
Second it uses the SPIs to adjust estimates of real per capita personal income and real per capita GDP.
The results do not contain many great surprises, but it nice to get reliable data comparing the cost of living and to make realistic comparisons of living standards across the country.
For example, as we all knew the most expensive places to live in the US or New York, California, Boston and the Washington, D.C. area.
SPI PER CAPITA GDP
(US average = 100)
New York-New Jersey-Long Island 146.6 ……….85.5
San Jose – Santa Clara………………….. 143.4 ……..118.5
San Francisco…………………………………139.9 ……..112.2
Bridgeport-Stamford-Norwalk…….. 134.7…….. 143.5
Honolulu ……………………………………….131.4 ……….82.9
Boston-Cambridge-Quincy………….. 124.8 ………112.6
San Diego ……………………………………..122.4 ………..98.9
Los Angles – Long Beach ………………120.5 ………..98.5
Manchester-Nashua NH ………………120.3 ………..94.0
Washington-Arlington-Alexandria .118.7 ……….133.5
Salinas CA…………………………………… 118.5 ………….81.7
Santa Barbara ………………………………117.7 …………89.3
In Chicago the SPI is 107.1 and adjusted real per capita GDP is 109.2 while in Philadelphia they are 107.3 and 113,4, respectively. I’ve put a table comparing different cities under the fold. The message that comes through is that the places in the country with high real per capita gdp and lowest prices are the mid-sized, interior cities. Denver has an SPI of 95.5 and GDP of 139.6. Other cities with good numbers are Indianapolis with an SPI of 93.5 and GDP of 136.9.; Nashville SPI=94.2 & GDP=122.8. Minneapolis-St.Paul-Bloomington SPI=101.8 & GDP=128.3.
But sometimes numbers can be misleading or distorted. For example, Houston has an SPI of 98.5 and a GDP of 146.4. But the high GDP reflects the impact of oil. In contrast, real per capita personal income in Houston is only 115.5. Where I first noticed it was for New Orleans when it had a real GDP of 125.1 of the national average. For the entire state of Louisiana it raised the GDP to 113.0 and making it the eleventh wealthiest state. But per capita income was only 84.1, the second lowest state –Hawaii was the lowest state with per capita income of 76.7. Casper Wyoming had the highest GDP at 238.2 of the national average – how many oil wells do they have in Casper?
When you compare adjusted real per capita gdp by state there are several points that stand out.
First, the range is much narrower. In both cases Delaware is the wealthiest state and Mississippi is the poorest state. In Delaware it does not make much difference as it is 161.5 before adjustment and 160.1 after. But it makes a big difference for Mississippi, lifting it from 65.7 to 79.1. Before adjustment, Delaware is 2.5 times Mississippi but afterwards it is only two times.
The other big changes are for New York and California. New York falls from 107.7 to 80.2 while California falls from 119.3 to 89.3. The study does not publish detailed data on rural areas or small towns, but it shows the real per capita income, real gdp and the SPI in these areas are around 80. Because Los Angles and New York have below average GDP it does not offset the low living standards in the rural areas of the states. But apparently rural New York has its own problems as one of the lowest GDP I spotted was Kingston,NY with a GDP = 53.7. The lowest was Lake Havasu City, Az at 48.5.
After adjustment a bloc of Midwestern states with relatively low population density are ranked very high. They are Wyoming, North and South Dakota, Iowa, Nebraska, Minnesota and Colorado. I suspect a major factor here is that they do not have urban slums. Massachusetts falls
from 119.2 to 100.7 while Texas increases from 103.4 to 110.9. But otherwise, it is very hard to make broad generalizations about the impact of the SPI adjustments.
The Washington, D.C. real GDP data is significantly distorted by commuters. The output of workers commuting into the city are counted in GDP but they are not included in the population.
