Internal Spatial Differences in a Large Country: Consumer Price and Inequalities

Song Ze (宋泽)1, Liu Zilan (刘子兰)2 and Zou Hong (邹红)*3

1 School of Economics, Nankai University, Tianjin, China

2 Business School, Hunan Normal University, Changsha, China

3 School of Economics, Southwestern University of Finance and Economics (SWUFE), Chengdu, China

Abstract: Unbalanced price changes across regions cause consumption inequalities within a large country. With consumer demand system model, this paper estimated the dynamic changes of the true-cost-of-living index (TCLI) and consumption inequalities in China. Results indicate urban households experienced a rising TCLI from 2002 to 2014, among which, Liaoning increased the most and Guangdong the least. Beijing’s TCLI was the highest and Sichuan the lowest over the same period. Since 2008, the unbalanced rise of consumer price has gradually diminished, and gaps between real and nominal consumption inequalities have narrowed. However, real consumption inequalities continue to rise, and low-income groups are affected the most by inflation.

Keywords: spatial price differences, true-cost-of-living index, consumption inequalities

JEL Classification Code: D12, E31, I31

DOI: 10.19602/j.chinaeconomist.2021.07.08