New characteristics and hedonic price index numbers

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 7529

Classification and Topics

• Classification: Wirtschaft ; Design of Experiments: General ; Design of Experiments: Laboratory, Individual ; Design of Experiments: Laboratory, Group Behavior
• Subject: extensive and intensive margins of consumption ; characteristics model ; quality change ; Sato-Vartia-Feenstra index numbers

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Crawford, Ian ; Neary, J. Peter
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/198889
• Last update: 10.03.2025, 11:44 AM CET