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Title: |
On Measuring the True Cost of Living for the
Developing Country: Case of Korea |
| Author: |
Lee, Tong Hun;
Chung, Keun Jon |
| Author
Affiliation: |
Ajou U;
Keimyung U |
| Source: |
International Economic Journal, Spring 1997, v. 11, no. 1, pp. 1-14 |
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Publication Date: |
Spring 1997 |
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Abstract: |
In a rapidly developing country without an
adequate mortgage market, it is difficult to impute the cost of owning a
home and, as a result, this cost is often omitted from the Consumer
Price Index (CPI). To resolve this difficulty, by using an intertemporal
consumption allocation model, this paper develops a method for deriving
the user cost of owner-occupied housing which is in turn incorporated in
the so-called True Cost of Living Index (TCLI). When applied to Korea as
an example, the statistical results show substantially higher inflation
than previously assumed, indicating the importance of homeownership cost
in measuring the standard of living for a developing country. Thus, in
both theory and practice, our TCLI based on the Diewert-superlative
chain index is superior to the conventional fixed weight CPI, indicating
its usefulness not just for Korea but also for other countries. |
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