When looking at spatial disparities across regions within a country the standard approach that I have seen is to look at differences in incomes across regions.
However, this doesn’t control for the impact of local prices. I would have thought we should expect to see local prices increase in areas of higher income.
An additional challenge must be data availability here, in that I don’t know if there is good local price data available, certainly not in the country I work. I imagine that we could use local house prices/rents as some proxy for local prices and control for this.
Is there a standard way to control for local price effects when comparing incomes across regions? Or at least examples of analysis where this has been done well?
Thanks for any help,