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Adjacent Period Dummy Variable Hedonic Regressions and Bilateral Index Number Theory

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  • Erwin Diewert

Abstract

The paper addresses whether hedonic regressions should be weighted (by either quantities sold or expenditures on the model) or not. To make some progress on the issue of what weights to choose, the paper uses the time dummy variable hedonic regression model applied to only two periods. In this framework, the time dummy becomes a measure of price change between the two periods and a transformation of the estimated dummy variable can be regarded as a generalized bilateral index number formula. The axiomatic properties of this measure of price change are examined for various alternative weighted schemes. If the models in the two periods are exactly the same, the hedonic regression measure of price change reduces to a bilateral index number formula.

Suggested Citation

  • Erwin Diewert, 2005. "Adjacent Period Dummy Variable Hedonic Regressions and Bilateral Index Number Theory," Annals of Economics and Statistics, GENES, issue 79-80, pages 759-786.
    • Handle: RePEc:adr:anecst:y:2005:i:79-80:p:759-786
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    Cited by:

    1. Lavee, Doron & Bahar, Sefi, 2017. "Estimation of external effects from the quarrying sector using the hedonic pricing method," Land Use Policy, Elsevier, vol. 69(C), pages 541-549.
    2. W. Erwin Diewert & Saeed Heravi & Mick Silver, 2009. "Hedonic Imputation versus Time Dummy Hedonic Indexes," NBER Chapters, in: Price Index Concepts and Measurement, pages 161-196, National Bureau of Economic Research, Inc.
    3. Adam Gorajek, 2018. "Econometric Perspectives on Economic Measurement," RBA Research Discussion Papers rdp2018-08, Reserve Bank of Australia.
    4. Sebastian Weinand & Ludwig von Auer, 2019. "Anatomy of Regional Price Differentials: Evidence From Micro Price Data," RatSWD Working Papers 268, German Data Forum (RatSWD).
    5. Kim, Wook Joon & Kim, Yongkyu, 2018. "An estimation of quality-adjusted prices for mobile services in Korea," 22nd ITS Biennial Conference, Seoul 2018. Beyond the boundaries: Challenges for business, policy and society 190346, International Telecommunications Society (ITS).

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