A Complete Picture of Spatial Disparity in Cost of Living Index: A Case Study of Pakistan’s Cities

This study constructed the cost of living index by using all available data on 488 commodities of the 40 cities of Pakistan for the month of May 2019. Empirically, results revealed that there is a statistical difference in the cost of living index among cities from the standard of living. Based on the national average prices, the Islamabad is ranked at first, and Mirpurkhas, a city of Sindh, is at fortieth. Furthermore, Province wise highest cost of living is found in NWFP and lowest in Sindh. By employing national average prices that have aggregation bias; therefore, it is replaced by province-level prices; the ranking among cities within the province is changed. At province average prices, the highest cost of living index is found in Rawalpindi, Karachi, Abbottabad, and Loralai, and the lowest cost of living in Gujranwala, Mirpurkhas, Peshawar and Turbat, for the province of Punjab, Sindh, NWFP, and Baluchistan, respectively. This spatial disparity in the cost of living is mainly due to specific factors of production in a specific city as compare to other; Quetta is known as “fruit garden in Pakistan,” and Khuzdar is an agriculture-based city. Similarly, Karachi and Lahore have (i) high per capita income, and (ii) over-population are the factors of the high cost of living. Hence, in the light of the present study, it is suggested there is no single rule through which disparity in the cost of living can be overcome. Preferably the solution is laying at the micro-level, i.e., the disparity in the cost of living is mainly due to disparity in prices of same goods and services across cities, therefore by controlling prices of goods and services across the cities will suppress this disparity.