This paper examines the optimal location-based redistribution policy and shows that adjustment for local price levels is occasionally optimal, but never for the reasons suggested by the popular press. First, the existence of a spatial equilibrium suggests that utility levels will be equalized...

The federal income tax and major welfare programs do not take into account significant cost-of-living variations among regions. This article considers what adjustments might be appropriate in light of the distributive purposes of tax and welfare systems and concerns about the efficiency of the...

In many cities, restaurants and retail establishments are spatially concentrated. Economists have long recognized the presence of demand externalities that arise from spatial agglomeration as a possible explanation, but empirically identifying this type of spillovers has proven difficult. We...

We document that individuals who grew up in areas with high density of firms are more likely, as adults, to become entrepreneurs, controlling for the density of firms in their current location. Conditional on becoming entrepreneurs, the same individuals are also more likely to be successful...

This paper briefly summarizes the analysis and findings of the 1996 Boskin Commission Report, Toward a More Accurate Measure of the Cost of Living. It then reviews the comments and criticisms that appeared soon after the Report was issued and provides responses to the more important criticisms....

The recent financial crisis in Indonesia has resulted in dramatic price increases. Using very recent data, we investigate whether these price increases have impacted the cost-of-living of poor households in a disproportionately harsh way. We find that the poor have indeed been hit hardest. Just...

An indexed unit of account is a unit of measurement defined using an index such as a consumer price index so that prices defined in terms of these units will automatically adjust to changing economic conditions. Evidence on sticky prices and money illusion, and evidence from countries (notably...

What are the unequal effects of changes in consumer prices on the cost of living? In the context of changes in import prices, most analyses focus on variation across households in initial expenditure shares on imported goods. However, the unequal welfare effects of non-marginal foreign price...