An Empirical Study Of The Cost Of Living Index In Urban China Based On Aids Model

With Chinese social and economic development, the level of income and consumption in urban China has significantly improved, consumer price index of urban has risen. The rise of price level will cause decline of actual living standards of residents, and have an impact on residents’expenditure. Generally, when the price level rose, the expenditure of low-income will have a greater impact. Quantitatively, how great on earth is this kind of difference? How to subsidize the residents, in particular, the low-income residents, to maintain their standard of living unchanged? This paper attempts to make use of cost of living index to analyze these questions.In this paper, we compute cost of living index in urban China by the methods of the almost ideal demand system (AIDS) model, and analyze difference of the cost of living index and the official CPI. Meanwhile, compare and forecast the cost of living index of eight different income groups.Base on the cost of living index in urban China, we have the conclusion that CPI tend to exaggerate cost of living index and the average gap was6.2%. What’s more, we find that low-income and middle-income will be4.2%higher than high-income by the cost of living index analysis of different income groups.The structure of this paper as follows:the first part is introduction; the second part is research methods and data sources; the third part is cost of living index of urban residents in China; the forth part is cost of living index analysis of different income groups; the fifth part is conclusions of this paper.