Sub-national spatial price indices for water services in Italy: a preliminary estimation

Abstract

Italy exhibits pronounced territorial economic disparities, making an accurate measurement of regional price level differences essential for assessing inequalities in real income, household consumption expenditure, and poverty. To this end, the Italian National Institute of Statistics (Istat) is carrying out a project to compute Sub-national Spatial Price Indices (SSPIs) for the 12 Divisions of the ECOICOP (European Classification of Individual Consumption According to Purpose) classification. These indices are crucial for enabling more robust regional comparisons in economic analysis and for supporting evidence-based policymaking. Initial results, based on 2022 data, have been produced for five divisions and reveal substantial differences in price levels across Italian regions. Work is currently underway for Division 04 “Housing, Water, Gas, Electricity and Other Fuels”.

In this paper, we present the first results of SSPI estimation for two Basic Headings (BHs) within Division 4: “Water supply” and “Sewage collection.” The analysis is based on 2023 Consumer Price Index (CPI) data, whose characteristics vary depending on the municipality of observation. To ensure the comparability required for SSPI computation, these data are standardized prior to estimation.

The indices are estimated using a Regional Product Dummy (RPD) model, taking into account differences in consumption levels in accordance with Eurostat methodology. Preliminary findings highlight substantial regional disparities in price levels for the services examined, underscoring the importance of sub-national price measurement for understanding real consumption and household living conditions.