1. Real Personal Income and Regional Price Parities
Bettina Aten, Eric Figueroa, and Bryan Vengelen
October 25, 2016

2. Outline
Overview
Methodology
Results and Applications

3. Outline
Overview
Methodology
Results and Applications

4. Real Personal Income (PI)
Adjusted for price level differences:
Across regions
Over time
Price adjustment uses:
Regional Price Parities
US Personal Consumption Expenditure (PCE) price index

5. Regional Price Parities (RPPs)
Multilateral spatial price indexes measuring price level differences across regions for a specified period.
Useful for comparing economic data such as consumption expenditures and income levels, e.g. BEA’s Personal Income series.

6. 2014 Regional Price Parities
Results: State RPPs in 2014
RPPs show percent difference in price levels:
Across regions and expenditure categories
For one specified time period
Price level across all regions and expenditures equals 100.
Selected States
2014 Regional Price Parities
All Items
Goods
Services
Rents
Other
Arkansas
87.5
95.1
62.5
93.5
California
112.4
103.0
147.7
105.6
Hawaii
116.8
108.9
158.4
103.6
Mississippi
86.7
94.4
63.2
93.4
New York
115.7
108.2
136.6
112.5
All States*
100.0
99.4
101.1
100.1
* Includes the District of Columbia

7. 2014 Regional Price Parities
Results: State RPPs in 2014
RPPs show percent difference in price levels:
Price level in Arkansas is 12.5% lower than the national average.
Price level in New York is 32.2% higher than in Arkansas.
87.5 / 100 = 0.875
115.7 / 87.5 = 1.322
Selected States
2014 Regional Price Parities
All Items
Goods
Services
Rents
Other
Arkansas
87.5
95.1
62.5
93.5
California
112.4
103.0
147.7
105.6
Hawaii
116.8
108.9
158.4
103.6
Mississippi
86.7
94.4
63.2
93.4
New York
115.7
108.2
136.6
112.5
All States*
100.0
99.4
101.1
100.1
* Includes the District of Columbia

8. Price Adjustments Arkansas, 2014
Personal Income (billions) $111.5
Regional Price Parity
PCE Price Index (2009 = 100)
𝐏𝐈 𝐚𝐭 𝐑𝐏𝐏𝐬 = PI RPP ∗Balancing Factor = $ ∗0.998 =$𝟏𝟐𝟕.𝟕
𝐑𝐞𝐚𝐥 𝐏𝐈 = PI at RPPs PCE Price Index = $ = $𝟏𝟏𝟕.𝟎
𝐈𝐦𝐩𝐥𝐢𝐜𝐢𝐭 𝐑𝐞𝐠𝐢𝐨𝐧𝐚𝐥 𝐏𝐫𝐢𝐜𝐞 𝐃𝐞𝐟𝐥𝐚𝐭𝐨𝐫 (𝐈𝐑𝐏𝐃) = PI Real PI = $111.5 $ = 𝟗𝟓.𝟑

9. Outline
Overview
Methodology
Results and Applications

10. Data Sources
Bureau of Labor Statistics (BLS), Consumer Price Index program.
Detailed expenditure categories
Large sample :
200,000+ price observations per year
Census Bureau’s, American Community Survey (ACS).
Detailed rent price levels
500,000+ price observations per year

11. Stage 1 Estimate price levels for BLS areas Methods: 38 urban areas
16 expenditure classes
Methods:
Hedonics and outlier review
Multilateral aggregation

12. Urban: 3 Nonmetro (by Region) Urban: 4 Small Metro (by Region)
4 Rural Regions
Urban: 3 Nonmetro (by Region)
Urban: 4 Small Metro (by Region)
CPI Areas: 38 Urban, 4 Rural
Urban: 31 Large Metro Areas d

13. Expenditure classes 16 Expenditure classes
Later controlled to National PCE shares

14. Stage 2 Estimate RPPs for Method: States, state portions, metro areas
All items, goods, rents, and other services
Method:
Allocate price levels and weights to counties
Replace CPI rents weights with ACS based estimates
Aggregated to states and metropolitan areas
Replace CPI rents price levels with ACS based rents
2nd Multilateral Aggregation

15. Outline
Overview
Methodology
Results and Applications

16. Southeast Region
Plains Region
Mideast Region
State detailed RPPs
State rent and other services RPPs
State rent RPPs
State all items RPPs

17. Real per capita personal income
Plains real per capita personal income
Southeast real per capita personal income
Mideast real per capita personal income
Real per capita personal income

18. Real personal income for Metro Areas

19. Applications Analysis of real regional income
Adjustment of other consumption related data
PCE-by-State
Supplemental Poverty Measures
In collaboration with Census Bureau ( )
Outside Research

20. Summary RPPs measures price level differences across regions
Combine with US PCE price index to estimate differences across time
Application allows estimation of real income levels and change
Data Available:

21. Contact Information
RPP Program: (301) Bryan Vengelen Regional Prices Branch Bureau of Economic Analysis (301)