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PRICE HETEROGENEITY AND “REAL” INEQUALITY: A CASE STUDY OF PRICES AND POVERTY IN RURAL SOUTH INDIA
Author(s) -
Rao Vijayendra
Publication year - 2000
Publication title -
review of income and wealth
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.024
H-Index - 57
eISSN - 1475-4991
pISSN - 0034-6586
DOI - 10.1111/j.1475-4991.2000.tb00955.x
Subject(s) - economics , price index , poverty , market liquidity , index (typography) , inequality , econometrics , monetary economics , economic growth , mathematical analysis , mathematics , world wide web , computer science
This paper, based upon a case‐study of three Indian villages, studies whether households within the same market pay different prices for identical goods. It is found that not only are unit prices for food heterogeneous, but that the poor pay more for the same goods than the rich. This is because liquidity constraints force poorer households to purchase goods in small quantities and consequently subject them to quantity premiums. Household specific index numbers are used to adjust nominal incomes to real values and it is found that Gini coefficients of real incomes are between 12 percent to 23 percent greater than the Gim for nominal incomes. An econometric analysis of the determinants of prices shows that incomes are negatively correlated with prices, as is family size, but that the amount of land owned shows a positive relationship.