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New Characteristics and Hedonic Price Index Numbers

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  • Neary, Peter
  • Crawford, Ian

Abstract

Changes in product characteristics on the extensive margin are an important and hitherto neglected dimension of quality change. Standard techniques for quality-adjusting price indices cannot handle such changes satisfactorily, which leads to an economically and statistically significant bias in the measurement of prices and real output. We combine theoretical insights from index numbers and demand for characteristics to develop a new method for incorporating changes on the extensive characteristic margin. Applied to data on new car sales in the U.K., our method leads to revisions in estimated inflation rates for this commodity group that are both plausible and quantitatively important.

Suggested Citation

  • Neary, Peter & Crawford, Ian, 2019. "New Characteristics and Hedonic Price Index Numbers," CEPR Discussion Papers 13445, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:13445
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    as
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    Cited by:

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    2. Gabriel Ehrlich & John C. Haltiwanger & Ron S. Jarmin & David Johnson & Matthew D. Shapiro, 2020. "Reengineering Key National Economic Indicators," NBER Chapters, in: Big Data for Twenty-First-Century Economic Statistics, pages 25-68, National Bureau of Economic Research, Inc.
    3. Abe, Naohito & 阿部, 修人 & Rao, D.S.Prasada, 2020. "Generalized Logarithmic Index Numbers with Demand Shocks: Bridging the Gap between Theory and Practice," RCESR Discussion Paper Series DP20-1, Research Center for Economic and Social Risks, Institute of Economic Research, Hitotsubashi University.
    4. Rodney P. Jones, 2021. "Were the hospital bed reductions proposed by English Clinical Commissioning Groups (CCGs) in the sustainability and transformation plans (STPs) achievable? Insights from a new model to compare interna," International Journal of Health Planning and Management, Wiley Blackwell, vol. 36(2), pages 459-481, March.
    5. Sands, Sean & Ferraro, Carla & Campbell, Colin & Kietzmann, Jan & Andonopoulos, Vasiliki Vicki, 2020. "Who shares? Profiling consumers in the sharing economy," Australasian marketing journal, Elsevier, vol. 28(3), pages 22-33.
    6. Mo Abdirahman & Diane Coyle & Richard Heys & Will Stewart, 2022. "Telecoms Deflators: A Story of Volume and Revenue Weights," Economie et Statistique / Economics and Statistics, Institut National de la Statistique et des Etudes Economiques (INSEE), issue 530-31, pages 43-59.

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    More about this item

    Keywords

    Extensive and intensive margins of consumption; Characteristics model; Quality change; Sato-vartia-feenstra index numbers;
    All these keywords.

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles

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