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Assessing Bias in the Consumer Price Index from Survey Data

Author

Listed:
  • Alan B. Krueger

    (Princeton University and NBER)

  • Aaron Siskind

    (Princeton University)

Abstract

This paper compares self-reported changes in families' financial status to actual changes based on annual time-series data calculated from the PSID. The results indicate that the Consumer Price Index does a reasonably accurate job reconciling self-reported changes in financial status with measured changes in real income. Earlier work by Nordhaus (I998) reached a different conclusion because it did not account for changes in the shape of the income distribution.

Suggested Citation

  • Alan B. Krueger & Aaron Siskind, 1997. "Assessing Bias in the Consumer Price Index from Survey Data," Working Papers 771, Princeton University, Department of Economics, Industrial Relations Section..
    • Handle: RePEc:pri:indrel:392
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    References listed on IDEAS

    as
    1. Brent R. Moulton, 1996. "Bias in the Consumer Price Index: What Is the Evidence?," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 159-177, Fall.
    2. Eldar Shafir & Peter Diamond & Amos Tversky, 1997. "Money Illusion," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(2), pages 341-374.
    3. Timothy F. Bresnahan & Robert J. Gordon, 1996. "The Economics of New Goods," NBER Books, National Bureau of Economic Research, Inc, number bres96-1.
    4. Robert A. Pollak, 1998. "The Consumer Price Index: A Research Agenda and Three Proposals," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 69-78, Winter.
    5. Matthew D. Shapiro & David W. Wilcox, 1996. "Mismeasurement in the Consumer Price Index: An Evaluation," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 93-154, National Bureau of Economic Research, Inc.
    6. William D. Nordhaus, 1998. "Quality Change in Price Indexes," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 59-68, Winter.
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    Cited by:

    1. Luechinger, Simon & Raschky, Paul A., 2009. "Valuing flood disasters using the life satisfaction approach," Journal of Public Economics, Elsevier, vol. 93(3-4), pages 620-633, April.

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    More about this item

    Keywords

    consumer price index; CPI; real income; PSID; Panel Study of Income Dynamics;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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