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- Title
New Characteristics and Hedonic Price Index Numbers.
- Authors
Crawford, Ian; Neary, J. Peter
- Abstract
Changes in product characteristics on the extensive margin (the addition of new features and the removal of old ones) are an important and hitherto neglected dimension of quality change. Standard techniques for adjusting price indices for new goods cannot handle such changes satisfactorily, and this leads to an economically and statistically significant bias in the measurement of prices and real output. We combine insights from the theories of exact index numbers and demand for characteristics to develop a new method for incorporating changes on the extensive characteristic margin. Applied to U.K. data on new car sales, our method leads to revisions in estimated inflation rates for this commodity group that are both plausible and quantitatively important.
- Subjects
UNITED Kingdom; PRICE indexes; INDEX numbers (Economics); PRICES; AUTOMOBILE sales &; prices; PRICE inflation
- Publication
Review of Economics & Statistics, 2023, Vol 105, Issue 3, p665
- ISSN
0034-6535
- Publication type
Article
- DOI
10.1162/rest_a_01079