An annual cost of living index for the American states, 1960-1995

An enormous amount of research on state politics and policy relies on monetary variables. Such variables are affected by differences in the purchasing power of a dollar over time and across states, but a lack of information about geographic variation in the costs of goods and services has kept social scientists from taking these differences into account. We remove this obstacle by constructing an annual cost of living index for each continental American state from 1960 to 1995. The index constitutes a deflator suitable for cross-sectional, time-series, and pooled research. After establishing the reliability and validity of our index using a battery of diagnostic tests, we illustrate the importance of deflating monetary variables by examining two variables that are often used in state politics research.