The comparison of the cost of living in different geographical areas can be done using cost of living indexes. Several methodologies have been developed in order to make international comparisons, none of which is generally accepted to be the most adequate. In this article, not only do we describe some of most known methodologies, but also their most important properties. Our goal is to apply these methods to compare geographical areas within the same country. The empirical application to the Portuguese case is presented in Bago d’ Uva and Parente (2001).

keywords: cost of living indexes, purchasing power parities.