Temporal cost-of-living index: from the generation of conception to the applied assessment

Abstract

The purpose of this paper consists in the identification of historical development pattern of the cost-of-living index, which is a significant price indicator of macroeconomic process.Materials and methods. The analysis of the cost-of-living index conception in dynamics is realized on the base of the foreign (American and West European) periodical data, also on the base of bulletins of U.S. Bureau of Labor Statistics. The methods of research is an analysis of generated conceptions of the cost-of-living index, mathematically well-founded selection of possible formulae of cost-of-living index, empirical justification of hypotheses about the ratio of the cost-of-living index and other indexes, the numerical estimation of bias calculated in relation of the cost-of-living index.Results. The history of cost-of-living index development was divided into two stages, the boundary between two stages is 1945, when the price index, which was calculated before this moment and named the cost-of-living index, was renamed the consumer price index. The first stage (from the middle of 1910th to 1945) was described by the first accumulation of data and researches. The most part of researches consists of the survey papers and articles estimating the modern methods of cost-of living index assessment. In addition, there are some articles about the conception of cost-of-living index ant its formulae that are the base of researches after 1945. On the second stage when the investigations of cost-of-living index and consumer price index were divided, the most part of articles consists of the mathematical selection and proofs concerning the detection of the sphere of determinant to cost-of-living index of indicators (income and expenditure, used technology, family structure), also concerning the inclusion and connection of cost-of-living index in the context of economics. Empirical works of the second stage confirm some theoretical ideas on the base of national statistics.Conclusion. The temporal cost-of-living index is the significant indicator not only of price process in the national economy, also dynamics marker of the standard of living. The effort to attract the attention to cost-of-living index will allow methodically enriching the economic researches and generating the ways of this indicator development. Among the ways it needs to mark out the calculating “alternative” consumer price indexes with due regard to approximation to cost-of-living index, realization of econometric investigation on the base of Russian statistics and intensification of the theoretical analysis on the base of conception of the true cost-of-living index by A. Konüs.