An Interstate Cost-of-Living Index

This research describes a simple way to generate an interstate cost-of-living index from market basket data collected at the standard metropolitan statistical area (SMSA) level. Models were developed for each of four regions to explain differences in the cost of living among more than 180 SMSAs. The regression coefficients were then used as weights and combined with comparable state level data to establish a state cost-of-living index. Finally, the state cost-of-living index values were normalized so that 100 represents the national average for all states weighted by their population. In the concluding section, the 1988–1989 average teacher salary for each state is divided by the interstate cost-of-living index to calculate an adjusted average salary.