Measuring regional price differences in the Philippines: 1965-1975
Date
1980-04
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Abstract
Applying Theil's index of relative price differences to regional price data for 1965, 1971 and 1975, this paper shows that differences in price levels exist between regions and are increasing over time.
Aside from measuring relative differences in price levels Theil's index allows a one-dimensional ranking of regional price level such that their relative differences can be measured as on a distance line.
It is clearly shown that Manila and Suburbs (Region I) has the highest price level and is responsible for 64 per cent of total regional price differences in 1965, 62 per cent in 1971 and 63 per cent in 1975.
Differences in price levels among the other regions, though significant and increasing over time, are small when compared to price level differences involving Manila and Suburbs (Region I).
Three main structural types are observed. Again, large structural price differences are measured between Manila and Suburbs (Region I) and other regions, though these differences are found to decrease over time.
Regional price levels exhibit a uniform rate of change, stemming mainly from weighted food price increases, which accelerate from an average of 46 per cent for 1965-1971 to 56 per cent for 1971-1975. Structural changes within regions over time are small.
Average differences in expenditure shares, which are the weights used in Theil's index, are also looked into.