Department of Labor Logo United States Department of Labor
Dot gov

The .gov means it's official.
Federal government websites often end in .gov or .mil. Before sharing sensitive information, make sure you're on a federal government site.


The site is secure.
The https:// ensures that you are connecting to the official website and that any information you provide is encrypted and transmitted securely.

Alternative Consumer Price Index Aggregations: Plutocratic and Democratic Approaches

Mary F. Kokoski


Price indices are constructed to represent a population by using a sample of household expenditure information as weights. This expenditure information must be aggregated across households. In most cases, including the U.S. Consumer Price Index (CPI), the aggregation method used corresponds to a plutocratic index. Other types of aggregation, such as the democratic index, are also possible, and, in terms of economic theory, equally valid. In practice, the plutocratic approach is much more practicable, but it may provide a different measure of price change than the democratic index.

This paper provides an empirical analysis of the differences between the plutocratic and democratic price indices, using data from the Consumer Expenditure Survey and the CPI for the periods 1987-1997, and for simulated price change scenarios. The results show that there is very little difference between the two types of index, and that one index need not always exceed the other. In the simulated scenarios, even the extreme cases where prices changed only for expenditure-inelastic goods and services, the difference between the democratic and plutocratic indices was only about one point for every ten percent increase in the relative prices of these goods.