The Hamilton method for estimating CPI bias is simple, intuitive, and has been widely adopted. We show that the method conflates CPI bias with variation in cost-of-living across income levels.
This paper received the 2017 Atkinson Award. The award is named Tony Atkinson, who was the founding editor of JPubE in 1972 and served as editor for 26 years, and is given every other year to the best paper published in the Journal of Public Economics.