Price Adjustment Using Regional Price Parities

New RPPs for 2022 and Revisions Back to 2008

By Eric Figueroa, Dakota Peterson, and Daniel Thang  |  May 13, 2024

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In December 2023, the U.S. Bureau of Economic Analysis (BEA) released new 2022 estimates of regional price parities (RPPs) for states, state portions, and metropolitan areas. RPPs for these geographies were revised from 2008 to 2021. The revised estimates incorporated improvements to the methodology for estimating housing services.

The release included two price-adjusted series that were estimated using the RPPs: real personal consumption expenditures (PCE) for states and real personal income for states, state portions, and metropolitan areas. For each, new estimates were released for 2022 and revised estimates were released for 2008 to 2021.

This article describes the RPPs and their use in the price adjustment of regional PCE and personal income. Per capita results for 2022 are presented, including RPP-adjusted and real estimates.1 Recent methods improvements are discussed, and their impacts on the RPPs are measured.

RPPs are spatial price indexes that measure price level differences across U.S. regions for one period. They are estimated annually and express each region’s price level relative to the U.S. average, which serves as the reference and is equal to 100. Each set of annual RPPs is independently estimated and cannot be compared across years.

RPPs are derived by directly comparing detailed price and expenditure microdata across all regions and product categories.2 The RPP for all items covers all consumption goods and services. RPPs are also estimated for four subcategories: goods, housing rents, utilities, and other services.

Another example of spatial price indexes is purchasing power parities (PPPs), which measure differences in price levels across countries for a given period and can be used to convert estimates of per capita gross domestic product into comparable levels in a common currency. BEA’s RPPs compare regions within the United States, without the need for currency conversion.

State RPP results for 2022

In 2022, state RPPs ranged from 112.5 in California to 86.6 in Arkansas (table 1). The District of Columbia’s RPP was 112.8. These results show that California’s price level was 12.5 percent higher than the U.S. average and 29.9 percent higher than in Arkansas.

States in the top RPP quintile were generally located in the Northeast and West and had relatively high housing rents and utilities RPPs (charts 1 and 2). California had the highest housing rents RPP across states at 160.2. The District of Columbia’s housing rents RPP was 177.2. Hawaii had the highest utilities RPP across states at 201.2, more than double the national average.

States in the bottom RPP quintile were all in the South and Midwest and had relatively low housing rents RPPs. West Virginia and Arkansas had the lowest housing rents RPPs at 53.9 and 55.8, respectively.

Chart 1. State Regional Price Parities (RPPs): All Items, 2022

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Chart 2. Category RPPs for Selected States, 2022

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Table 1. RPP and RPP-Adjusted Per Capita PCE and Personal Income by State, 2022
State RPP PCE (dollars) Personal income (dollars)
Per capita RPP-adjusted per capita Per capita RPP-adjusted per capita
United States 100.0 52,542 52,542 65,470 65,470
           
Alabama 87.8 42,391 48,295 50,916 58,007
Alaska 102.0 59,179 58,025 68,635 67,297
Arizona 99.9 50,123 50,175 58,442 58,502
Arkansas 86.6 42,245 48,783 52,618 60,762
California 112.5 60,272 53,589 77,036 68,494
Colorado 102.3 59,371 58,040 75,722 74,025
Connecticut 106.4 60,413 56,772 82,938 77,941
Delaware 98.0 54,532 55,669 63,243 64,562
District of Columbia 112.8 85,732 75,972 95,970 85,044
Florida 102.1 55,516 54,351 64,806 63,446
Georgia 95.8 47,406 49,468 56,589 59,051
Hawaii 110.8 54,655 49,310 61,779 55,737
Idaho 91.8 43,508 47,381 56,614 61,652
Illinois 101.3 54,341 53,666 67,655 66,816
Indiana 91.8 46,579 50,730 58,323 63,521
Iowa 88.4 45,455 51,407 60,222 68,108
Kansas 90.0 46,069 51,210 60,424 67,167
Kentucky 89.4 44,193 49,457 51,921 58,106
Louisiana 90.6 45,178 49,882 54,501 60,176
Maine 100.8 55,789 55,325 60,599 60,095
Maryland 105.0 52,651 50,164 70,228 66,911
Massachusetts 109.4 64,214 58,700 84,561 77,300
Michigan 93.4 49,482 52,963 57,038 61,050
Minnesota 97.7 52,849 54,081 68,840 70,444
Mississippi 87.3 39,678 45,435 46,370 53,099
Missouri 91.1 48,613 53,351 57,818 63,453
Montana 90.3 51,913 57,510 60,984 67,560
Nebraska 89.8 49,522 55,143 64,268 71,562
Nevada 96.4 50,922 52,833 62,085 64,415
New Hampshire 107.6 60,828 56,509 73,910 68,662
New Jersey 108.8 60,082 55,245 77,199 70,983
New Mexico 91.0 43,336 47,632 52,194 57,368
New York 107.6 58,571 54,434 75,407 70,082
North Carolina 94.2 47,834 50,777 58,109 61,684
North Dakota 88.7 52,631 59,365 70,360 79,363
Ohio 91.5 47,768 52,235 57,777 63,179
Oklahoma 88.8 42,046 47,364 56,298 63,420
Oregon 106.6 52,159 48,946 62,303 58,465
Pennsylvania 96.2 53,703 55,813 64,506 67,042
Rhode Island 104.7 52,820 50,449 63,557 60,703
South Carolina 93.6 46,220 49,406 53,618 57,314
South Dakota 88.0 48,997 55,684 68,176 77,481
Tennessee 91.8 46,280 50,416 58,292 63,501
Texas 97.5 49,082 50,335 62,586 64,182
Utah 94.5 48,189 51,009 59,457 62,936
Vermont 101.1 55,743 55,139 63,039 62,356
Virginia 102.1 52,057 50,967 68,985 67,542
Washington 109.8 56,567 51,496 75,332 68,578
West Virginia 89.2 44,460 49,818 49,993 56,018
Wisconsin 92.3 49,284 53,390 61,475 66,597
Wyoming 91.9 52,403 57,019 73,248 79,700
           
Maximum 112.8 85,732 75,972 95,970 85,044
Minimum 86.6 39,678 45,435 46,370 53,099
Range 26.3 46,055 30,537 49,600 31,945
PCE
Personal consumption expenditures
RPP
Regional price parities

Notes. Per capita personal income uses U.S. Census Bureau midyear population estimates available at the time of the release of the RPPs for 2022 on December 14, 2023.
Per capita values and ranges are computed from unrounded data.

BEA’s regional estimation of real PCE and real personal income uses two sets of price indexes. Current-dollar estimates are first adjusted by the RPPs. These results are then converted to real, constant-dollar estimates using the U.S. PCE price index.

RPP-adjusted PCE and personal income

RPP-adjusted results are obtained by dividing each region’s current dollar estimates by its RPP. This controls for geographic price level differences within the period and allows for more meaningful regional comparisons of expenditures and income.

For example, in 2022, per capita personal income for the District of Columbia was $95,970, more than double that of Mississippi, which was $46,370 (table 1). However, the District of Columbia’s RPP of 112.8 was higher than that of any state, while Mississippi’s was the second lowest, at 87.3. After adjusting with the RPPs, the difference in their per capita estimates narrows, and the District of Columbia’s result ($85,044) was only about 60 percent higher than Mississippi’s ($53,099).

State RPP results show a positive relationship between the price levels and income: in general, as RPP-adjusted per capita income increases so do the corresponding RPPs (chart 3). Similar results are also seen in international results obtained using PPPs.3

Chart 3. RPPs and Per Capita Personal Income, 2022

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In 2022, per capita PCE for California was $60,272, more than 40 percent higher than for Arkansas, which was $42,245. California’s RPP of 112.5 was the highest across states, while Arkansas’ was the lowest, at 86.6. After adjusting with the RPPs, the difference in their per capita PCE estimates narrows, and California’s result ($53,589) was only about 10 percent higher than Arkansas' ($48,783).

States with higher per capita PCE tend to have higher RPPs and are adjusted downwards, while those with lower per capita PCE tend to have lower RPPs and are adjusted upwards, narrowing the range. This is seen in the per capita PCE results, where the range across states drops from $46,055 before adjustment to $30,537 afterwards.

Real PCE and personal income

The RPP-adjusted estimates are converted to constant dollars by division with the U.S. PCE price index. The real results can also be obtained by dividing current-dollar estimates by BEA’s implicit regional price deflator (IRPD), the product of each region’s RPP, and the U.S. PCE price index.4 The IRPD links the independent sets of annual RPPs across years with a reference equal to the U.S. price level in 2017. The year-to-year change in the IRPDs is a measure of regional price change over time.

Within each period, the IRPD retains the RPPs’ directly measured geographic relationships. However, the IRPD’s time-to-time measurements are indirect, depending on comparisons of regional IRPDs linked across years through the U.S. PCE price index. They are not based on detailed comparisons of regional price and expenditure data across years.5 In 2022, the year-over-year percent change in the IRPD increased across all states, ranging from 11.8 percent in New Hampshire to 3.6 percent in Alaska (table 2).

In 2022, real per capita PCE increased in 42 states and District of Columbia (chart 4). Alaska had the highest growth rate at 5.8 percent, and New Hampshire had the largest decline at 3.7 percent. These states had the lowest and highest percent change in their IRPDs, respectively. In general, higher growth rates in the IRPDs are associated with lower annual percent change for real per capita PCE (chart 5).

Real per capita personal income declined in 46 states and the District of Columbia (chart 6). North Dakota had the highest growth rate at 2.8 percent, and Rhode Island had the largest decline at 8.7 percent. North Dakota’s IRPD change was 3.8 percent, and Rhode Island’s was 9.2 percent.

The real growth rates for PCE and personal income are impacted by the growth of the current-dollar estimates and the IRPD.6 In 2022, current-dollar PCE grew 9.2 percent, faster than the 6.4 percent growth rate in the U.S. PCE price index, and most states had increasing growth in their real estimates.7 On the other hand, current-dollar personal income only grew 2.0 percent in 2022, slower than the U.S. price growth, and most states had declining rates of change in their real estimates.

Chart 4. Real Per Capita Personal Consumtion Expenditures: Percent Change 2021–2022

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Chart 5. Percent Change in IRPDs, Per Capita PCE, and Real Per Capita PCE, 2021–2022

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Chart 6. Per Capita Personal Income, Percent Change 2021–2022

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Table 2. RPP, IRPD, and Real Per Capita PCE and Personal Income by State: 2021–2022
State RPP IRPD Real per capita PCE (constant (2017) dollars) Real per capita personal income (constant (2017) dollars)
2021 2022 2021 2022 Percent change 2021 2022 Percent change 2021 2022 Percent change
United States 100.0 100.0 109.0 116.0 6.4 44,328 45,279 2.1 59,110 56,419 −4.6
                       
Alabama 88.0 87.8 95.9 101.9 6.2 40,827 41,618 1.9 52,290 50,053 −4.3
Alaska 104.8 102.0 114.2 118.4 3.6 47,267 50,003 5.8 57,623 58,069 0.8
Arizona 96.6 99.9 105.3 115.9 10.1 43,701 43,239 −1.1 53,694 50,480 −6.0
Arkansas 88.9 86.6 96.9 100.5 3.7 40,473 42,039 3.9 53,390 52,430 −1.8
California 111.9 112.5 122.0 130.5 7.0 44,965 46,181 2.7 63,271 59,103 −6.6
Colorado 102.9 102.3 112.1 118.7 5.9 48,267 50,016 3.6 64,282 63,875 −0.6
Connecticut 102.8 106.4 112.0 123.5 10.3 50,331 48,924 −2.8 72,206 67,254 −6.9
Delaware 97.5 98.0 106.2 113.7 7.0 47,721 47,973 0.5 55,553 55,709 0.3
District of Columbia 111.7 112.8 121.7 131.0 7.6 64,996 65,469 0.7 80,287 73,383 −8.6
Florida 101.4 102.1 110.5 118.5 7.2 46,172 46,837 1.4 57,193 54,746 −4.3
Georgia 95.7 95.8 104.4 111.2 6.6 41,853 42,629 1.9 53,954 50,954 −5.6
Hawaii 112.5 110.8 122.7 128.6 4.9 40,393 42,493 5.2 50,224 48,095 −4.2
Idaho 91.6 91.8 99.9 106.6 6.7 39,698 40,830 2.9 54,349 53,199 −2.1
Illinois 101.3 101.3 110.4 117.5 6.5 44,782 46,247 3.3 61,090 57,654 −5.6
Indiana 92.5 91.8 100.8 106.5 5.7 42,218 43,717 3.6 56,596 54,811 −3.2
Iowa 89.8 88.4 97.9 102.6 4.9 43,171 44,300 2.6 59,451 58,769 −1.1
Kansas 91.3 90.0 99.5 104.4 4.9 42,653 44,131 3.5 58,997 57,958 −1.8
Kentucky 89.2 89.4 97.3 103.7 6.6 42,183 42,620 1.0 53,132 50,138 −5.6
Louisiana 91.4 90.6 99.6 105.1 5.5 42,275 42,986 1.7 54,860 51,925 −5.3
Maine 97.3 100.8 106.0 117.0 10.4 48,794 47,676 −2.3 55,479 51,855 −6.5
Maryland 106.2 105.0 115.7 121.8 5.2 41,951 43,229 3.0 59,801 57,736 −3.5
Massachusetts 106.6 109.4 116.2 126.9 9.2 50,994 50,585 −0.8 71,971 66,701 −7.3
Michigan 94.2 93.4 102.7 108.4 5.6 44,822 45,641 1.8 55,251 52,679 −4.7
Minnesota 98.4 97.7 107.2 113.4 5.7 45,545 46,604 2.3 62,468 60,785 −2.7
Mississippi 86.2 87.3 94.0 101.3 7.8 39,036 39,154 0.3 49,677 45,818 −7.8
Missouri 92.0 91.1 100.3 105.7 5.4 44,704 45,976 2.8 56,045 54,753 −2.3
Montana 91.4 90.3 99.6 104.7 5.2 48,203 49,560 2.8 58,704 58,297 −0.7
Nebraska 92.0 89.8 100.2 104.2 4.0 45,366 47,520 4.7 62,680 61,750 −1.5
Nevada 95.4 96.4 104.0 111.8 7.5 44,402 45,529 2.5 58,810 55,582 −5.5
New Hampshire 102.5 107.6 111.7 124.9 11.8 50,566 48,696 −3.7 64,766 59,247 −8.5
New Jersey 109.2 108.8 119.1 126.2 6.0 46,594 47,607 2.2 64,046 61,250 −4.4
New Mexico 89.8 91.0 97.9 105.6 7.8 40,809 41,047 0.6 52,357 49,501 −5.5
New York 109.7 107.6 119.6 124.9 4.4 44,627 46,909 5.1 63,666 60,472 −5.0
North Carolina 93.8 94.2 102.2 109.3 7.0 43,331 43,757 1.0 55,605 53,226 −4.3
North Dakota 90.9 88.7 99.1 102.9 3.8 49,640 51,158 3.1 66,621 68,481 2.8
Ohio 92.1 91.5 100.4 106.1 5.7 44,021 45,013 2.3 56,903 54,516 −4.2
Oklahoma 89.9 88.8 98.0 103.0 5.1 39,685 40,816 2.8 56,420 54,724 −3.0
Oregon 103.1 106.6 112.4 123.7 10.0 42,400 42,179 −0.5 54,976 50,448 −8.2
Pennsylvania 96.2 96.2 104.8 111.7 6.5 46,626 48,097 3.2 61,233 57,849 −5.5
Rhode Island 102.1 104.7 111.3 121.5 9.2 43,776 43,474 −0.7 57,342 52,380 −8.7
South Carolina 93.6 93.6 102.1 108.6 6.4 42,061 42,576 1.2 51,875 49,456 −4.7
South Dakota 90.1 88.0 98.2 102.1 4.0 46,797 47,986 2.5 66,784 66,857 0.1
Tennessee 90.6 91.8 98.8 106.5 7.9 43,281 43,446 0.4 57,819 54,794 −5.2
Texas 98.4 97.5 107.3 113.2 5.5 42,375 43,376 2.4 56,565 55,382 −2.1
Utah 94.6 94.5 103.1 109.6 6.3 42,529 43,957 3.4 55,448 54,307 −2.1
Vermont 98.6 101.1 107.5 117.3 9.1 47,631 47,516 −0.2 57,077 53,806 −5.7
Virginia 102.3 102.1 111.5 118.5 6.3 43,037 43,921 2.1 60,057 58,281 −3.0
Washington 108.8 109.8 118.6 127.5 7.5 43,967 44,377 0.9 62,680 59,175 −5.6
West Virginia 91.0 89.2 99.2 103.6 4.4 41,620 42,931 3.1 49,594 48,337 −2.5
Wisconsin 93.2 92.3 101.6 107.1 5.4 44,769 46,009 2.8 59,557 57,465 −3.5
Wyoming 91.5 91.9 99.7 106.6 6.9 48,993 49,136 0.3 70,876 68,772 −3.0
                       
Maximum 112.5 112.8 122.7 131.0 11.8 64,996 65,469 5.8 80,287 73,383 2.8
Minimum 86.2 86.6 94.0 100.5 3.6 39,036 39,154 −3.7 49,594 45,818 −8.7
Range 26.3 26.3 28.7 30.5 8.2 25,960 26,315 9.5 30,693 27,565 11.5
IRPD
Implicit regional price deflators
PCE
Personal consumption expenditures
RPP
Regional price parities

Notes. Per capita personal income uses U.S. Census Bureau midyear population estimates available at the time of the release of the RPPs for 2022 on December 14, 2023.
The implicit price deflator for the United States is equal to the national PCE price index, with a base of 2017.
Per capita values, ranges, and percent changes are computed from unrounded data.

The RPPs released in December 2023 incorporate an improvement to the estimation of housing rent and utility expenditures. Since 2021, BEA has used the American Community Survey’s public use microdata sample to create a streamlined and integrated approach to measuring housing services across all BEA’s data programs. That approach includes an adjustment to tenant rents observations if the reported rent includes utility costs. For these observations, the included utility costs are imputed and subtracted from the rent expenditure.

The improvement more precisely imputes these utility costs. Previously, the imputation was based on reported utility payments for similar housing units, without regard to how many utilities were consumed. The new method bases the imputed cost on the specific combination of utilities consumed. For example, if the tenant rent for a housing unit includes electricity and water costs, the imputation is based on reported utility payments in similar housing units that consume only those two utilities.

Revisions to RPPs from 2008 to 2016 have a larger range than those from 2017 to 2021 (chart 7). All years incorporate the improvement described above, but the earlier period also carries back revisions originally introduced in December 2022.8 The revisions from 2017 to 2021 primarily reflect the utility imputation improvement. These are small and do not exceed 1.0 percent in any year (table 3).

Chart 7. Percent Revision to Regional Price Parities by States, 2008–2022

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Table 3. Percent Revision to RPPs by State, 2017–2021
State 2017 2018 2019 2020 2021
United States 0.0 0.0 0.0 0.0 0.0
           
Alabama 0.2 0.3 0.0 0.1 −0.1
Alaska −0.1 0.0 0.2 0.5 0.3
Arizona 0.1 −0.2 −0.1 −0.1 −0.1
Arkansas 0.4 0.0 0.0 −0.1 −0.6
California 0.0 0.1 0.1 0.0 0.1
Colorado 0.0 0.1 0.1 −0.1 −0.1
Connecticut 0.0 −0.1 0.2 0.2 0.1
Delaware 0.0 0.0 0.1 0.2 −0.2
District of Columbia 0.0 −0.2 −0.3 −0.3 0.3
Florida −0.1 −0.1 −0.1 −0.1 0.0
Georgia 0.0 0.1 0.1 0.1 0.0
Hawaii 0.0 0.0 0.1 0.4 −0.6
Idaho 0.0 0.0 0.0 0.1 −0.2
Illinois −0.2 −0.2 −0.2 −0.3 −0.1
Indiana −0.1 0.0 0.0 −0.2 −0.3
Iowa −0.1 0.1 0.2 0.6 0.2
Kansas 0.0 0.1 0.0 0.1 0.1
Kentucky 0.2 0.1 0.1 0.1 0.1
Louisiana 0.0 0.0 −0.1 0.2 0.1
Maine 0.3 0.1 0.8 0.2 0.1
Maryland −0.1 0.0 −0.1 0.0 0.0
Massachusetts 0.0 −0.3 −0.3 −0.1 0.1
Michigan 0.1 0.1 0.0 −0.2 −0.1
Minnesota 0.0 −0.2 −0.2 0.1 0.0
Mississippi 0.2 0.1 0.1 −0.3 −0.5
Missouri −0.1 −0.1 0.0 0.0 0.0
Montana 0.1 0.0 0.0 0.3 −0.2
Nebraska 0.1 0.1 0.2 0.5 0.2
Nevada −0.1 0.0 0.0 0.1 −0.1
New Hampshire 0.1 −0.2 −0.1 0.0 0.0
New Jersey 0.0 0.1 0.0 0.0 0.1
New Mexico 0.0 0.0 0.2 0.2 −0.1
New York 0.1 0.0 0.0 0.0 0.2
North Carolina −0.1 0.1 0.0 −0.1 0.0
North Dakota 0.1 0.0 −0.1 −0.3 −0.2
Ohio 0.0 0.0 0.0 −0.2 −0.3
Oklahoma 0.0 −0.2 −0.3 −0.2 −0.4
Oregon 0.0 0.1 −0.1 −0.2 0.1
Pennsylvania 0.0 0.0 0.0 −0.1 −0.2
Rhode Island 0.0 −0.2 −0.1 −0.2 0.0
South Carolina 0.0 0.0 0.0 −0.2 −0.1
South Dakota −0.3 −0.2 0.0 0.7 −0.1
Tennessee 0.0 0.1 0.1 0.0 −0.3
Texas −0.1 −0.1 −0.1 0.1 −0.1
Utah −0.1 0.2 0.1 0.1 0.0
Vermont 0.1 −0.1 0.1 0.1 0.0
Virginia −0.2 −0.1 0.0 −0.1 0.0
Washington 0.0 0.0 0.0 −0.1 −0.1
West Virginia 0.2 0.2 0.3 0.0 0.2
Wisconsin 0.0 0.0 −0.1 0.0 −0.1
Wyoming 0.1 0.2 0.3 0.5 0.1
           
Maximum 0.4 0.3 0.8 0.7 0.3
Minimum −0.3 −0.3 −0.3 −0.3 −0.6
Range 0.7 0.6 1.1 1.0 0.9
RPPs
Regional price parities

Note. Percent revision and ranges are computed from unrounded data.

Footnotes

  1. RPP-adjusted estimates are presented here for methods illustration and are not available on BEA’s website.
  2. For more information on the estimation of RPPs, see “Regional Price Parities, Real Personal Consumption Expenditures, and Real Personal Income” on BEA’s website.
  3. For an analysis of the relationship between PPPs and income, see “What are PPP adjustments and why do we need them?” on the Our World in Data website.
  4. The price adjustment of personal income requires a small rebalancing. See “Regional Price Parities, Real Personal Consumption Expenditures, and Real Personal Income” on BEA’s website.
  5. The growth rate of the IRPDs will not necessarily equal the region or metropolitan area price deflators published by the Consumer Price Index (CPI) program at the U.S. Bureau of Labor Statistics. These deflators are calculated directly from extensive CPI price and expenditure microdata. The IRPDs are based on indirect comparisons of regional price levels that incorporate data from the American Community Survey, the Energy Information Administration, and BEA’s PCE by state results, in addition to the CPI microdata.
  6. The implicit price deflator for the United States is equal to the U.S. PCE price index, with a base of 2017.
  7. For more information on the state estimates of current-dollar PCE and personal income, see BEA’s Interactive Data Application and select “Regional Estimates.”
  8. This is the second of two improvements to the imputation. For information on the first, see Bettina Aten and Eric Figueroa, “Revisions to Source Data for Regional Price Parities: Updates Back to 2017,” Survey of Current Business (April 20, 2023).