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A non-parametric bound on substitution bias in the UK retail prices index

Author

Listed:
  • Laura Blow

    (Institute for Fiscal Studies and University of Surrey)

  • Ian Crawford

    (Institute for Fiscal Studies and Nuffield College, Oxford)

Abstract

This paper uses revealed preference restrictions and nonparametric statistical methods to bound true cost-of-living indices. These are compared to the popular price indices including the type used to calculated the UK RPI. This is used to assess the method of calculating the RPI for substitution bias.

Suggested Citation

  • Laura Blow & Ian Crawford, 1999. "A non-parametric bound on substitution bias in the UK retail prices index," IFS Working Papers W99/15, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:ifsewp:99/15
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    File URL: http://www.ifs.org.uk/wps/wp9915.pdf
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    References listed on IDEAS

    as
    1. Braithwait, Steven D, 1980. "The Substitution Bias of the Laspeyres Price Index: An Analysis Using Estimated Cost-of-Living Indexes," American Economic Review, American Economic Association, vol. 70(1), pages 64-77, March.
    2. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-973, July.
    3. Robinson, Peter M, 1988. "Root- N-Consistent Semiparametric Regression," Econometrica, Econometric Society, vol. 56(4), pages 931-954, July.
    4. A. P. Lerner, 1935. "A Note on the Theory of Price Index Numbers," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 3(1), pages 50-56.
    5. Hal R. Varian, 1983. "Non-parametric Tests of Consumer Behaviour," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 50(1), pages 99-110.
    6. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
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    More about this item

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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