Innovation
Cost of Living Index
Description: The ACCRA Cost of Living Index measures the cost of living in communities across the country by gauging the costs of groceries, housing, transportation, utilities, health care, and miscellaneous other goods and services — a typical market basket of goods and services. Taxes are not included. The data are presented as an index relative to the national average.
The index is designed for “moderately affluent professional managerial households.” Household income is assumed to be in the top quintile.
Participation in this study is voluntary, with the study being conducted by local chambers of commerce. Historically, this was a quarterly study. In 2007, it switched to being done for each of the first three quarters of the calendar year, with an annual average also computed.
The composite cost-of-living index and the index for the housing category are shown on the dashboard for Phoenix and Tucson. Additional places in Arizona participate in the study, but state-level data are not available.
Rationale: All other factors equal, a lower cost of living is a positive feature in attracting innovative firms and individuals. However, a low cost of living in an area perceived to not have a high quality of life may be a negative factor in innovation.
Data Sources: The Council for Community and Economic Research (C2ER) http://www.coli.org. The data are available only on a subscription basis, but the report is available at many libraries.
Comments on the Quality of the Data: While participating chambers of commerce must adhere to published standards, the study involves considerable sampling and the sampling is not done scientifically. Thus, bias is a concern. A confidence interval cannot be calculated because of the reliance on nonprobability samples. The C2ER suggests that differences of 3 percentage points in the composite index, and 5 percentage points in the component indexes, are not significant.
Even among those chambers participating, the data may not be available for a particular quarter. Because of the missing data, the figures reported on the dashboard are annual averages of the quarterly figures. Given that the list of participants changes each quarter and the national average is determined from the participants each quarter, this averaging of the quarters is technically incorrect. The 2007 annual average calculated in this way is slightly different from C2ER’s published annual average.
