Abstract

Gregory Kurtzon and Robert McClelland (2010) "Do the Poor Pay More Store-By-Store?"

There is a long standing interest in the question of whether or not low income households face the same prices as households with higher incomes. If low income households face lower or higher prices than high income households, then income inequality may be greater or lesser than is suggested by simple comparisons of incomes. Summarized in Sexton (1971), studies generally found either no difference in prices paid, or that the poor paid more for similar goods. In this paper we use data from the Telephone Point of Purchase Survey (TPOPS), previously unused for this subject, which collects information about household expenditures at outlets they patronize. In 2001, respondents were also asked a question about their income. Combining data from that survey with price data from the CPI Research Database (RDB), we compare prices charged at outlets patronized by families in each of three income categories, and calculate differences in expenditure weighted average prices. We also use detailed information in the RDB about the characteristics of each item being priced to adjust for possible differences in the quality of items sold. Overall, we find that the poor pay neither more nor less than the rich at the stores at which they shop.