Index
A
Aggregation. See also Subgroup indexes
across consumers, 26-27
across households, 4, 45, 79, 223-226, 230- 231, 240-246
for COLIs, 4, 15, 51-52, 53, 61-62, 85-86, 242
in CPI, 15, 23-24, 243-244, 305, 308, 311
data collection issues, 27
defined, 305
democratic indexes, 4, 5, 26-27, 45, 77-79, 86, 235 n.9
expenditure-weighted averaging, 26, 52, 60
geometric means formula, 5, 23, 24, 39, 50, 60, 77, 127, 210, 215 n.24, 279-280, 308
heterogeneity issue, 4, 26, 125 n.18, 223- 226, 229, 240-241
of individual price indexes, 44-45, 215, 235 n.9
mathematical approach, 77-79
national indexes, 4, 25, 26, 46, 87, 214, 219-221
plutocratic indexes, 4, 5, 26-27, 45, 77-79, 86, 235 n.9
population average of budget shares, 79
quality change adjustments and, 125 n.18
recommendations, 240-241
representative consumer concept, 241-246
strata indexes, 235 n.9
substitution effects and, 24-25, 26, 52
in superlative indexes, 52, 53, 215
in wage indexes, 200-201
American Housing Survey, 11, 36, 147
Apparel, 29, 67, 72, 117, 118, 120 nn.11&12, 124, 130, 142, 147, 227
Appliances and electronics, 6-7, 72, 114, 131, 138, 141, 147, 148, 163 n.12, 233 n.7.
See also individual items
Area strata, 311
Automobiles, 28-29, 33, 35, 72, 107, 109, 110, 111, 119, 121, 124, 142, 147-148, 227, 233 n.7
B
Base period, 41, 42, 69, 305, 309, 311
Basket price index. See Cost-of-goods index
Bias
duration neglect, 54
in hedonic quality adjustment methods, 128, 129, 133, 139, 140, 249
in inflation indexes, 217-218
in item replacement methods, 112-114, 121- 122, 136
new goods, 31, 32, 107-108, 112-121, 146- 148, 156-158, 160-161, 162, 273
outlet, 8, 33, 128, 168 n.16, 170, 172, 173- 174
point-of-introduction, 158-159, 160-161
reporting, 254-255
sample selection, 128, 156-157
seasonal, 234
substitution, 8, 33, 59-62, 93, 113, 128, 147, 168 n.16, 170, 172, 173-174, 248 n.18
within-sample, 140
on conceptual basis for CPI, 3, 14, 41, 73
criticisms of CPI, 1, 14, 27, 62
defined, 305
new goods bias estimates, 32, 157, 162, 163
outlet substitution bias estimates, 173-174
quality adjustment bias estimates, 27, 108, 109 n.2, 112-114, 115, 116-117, 119, 121, 131, 139, 146-148
on subgroup indexes, 228, 229, 250
on theoretical validity of CPI, 109 n.2
Bureau of Economic Analysis (BEA), 4, 102, 105, 189, 210, 214, 253, 274, 310
Bureau of Labor Statistics, 306
charge to committee, 17
quality adjustment approaches, 39, 73, 107- 108, 113 n.6, 114-122, 129-140
ScanData initiative, 266-267, 269
C
Capital gains and losses, 72
Cellular phones, 8, 31, 32, 107, 124-125, 140, 148, 156, 161, 165
Centers for Medical and Medicaid Services, 10, 189, 190
Chained index, 162, 167, 210, 253 n.2, 277, 305, 308, 310
Choke price. See Virtual price
Class-mean method, 117, 118, 119, 121, 134 n.30, 136-137, 139, 305-306
Climate change, 20
Commodities and Services (C&S) Survey, 11, 36, 37, 263, 281-282, 306
Commodity analysts (BLS), 107, 116, 118, 125, 134, 138-139, 306
Comparison situation
conceptual issues, 41, 42, 48-49, 51
period-based, 41, 306, 310, 311
Compensating variation, 48, 81, 153
Compensation issues
child support, 209
COLI and, 48, 51, 58, 61, 70-71, 81
conceptual bases for indexes, 48, 51, 58, 61, 70-71, 81
domain considerations, 21, 70, 103-105
employer-paid benefits, 21, 98, 103-105
MCPI components and, 186
social security recipients, 40, 43, 48
and standard of living, 48
superlative indexes, 60, 61, 191
Computers, 29, 109, 110, 117, 120 n.12, 124, 127, 129, 130, 134, 135, 140, 142, 147, 156, 166
Conceptual bases for indexes
aggregation of prices, 39, 51-52
availability of data and, 15, 42-43, 50
basket price (cost-of-goods) approach, 2-3, 14, 16, 18-19, 38-39, 41, 42-46, 47, 48- 49, 50, 57, 74-79, 94
COGI vs. COLI, 57-72
comparison situation, 41, 42, 48-49, 51
compensation issues, 48, 51, 58, 61, 70-71, 81
consumer demand functions, 49-50
cost-of-living approach, 2-3, 14, 15, 16, 18- 19, 38-39, 41, 43, 46-53, 57, 58, 65-68, 69, 79-93, 283-292
design considerations, 11, 40, 42, 43, 97, 191-192
domain-related, 3, 65-68, 94, 96-98
homotheticity in preferences, 49, 50-51
mathematical approach, 74-93
MCPI, 181-185
public perceptions and understanding of, 39, 58-59
purpose of index and, 40, 42, 43
quality adjustment, 2, 3, 14, 19, 28, 30, 39, 40, 57, 59, 62-64, 97-98, 106
reference period, 41, 42, 47-49, 51
stochastic approach, 41-42, 68
stocks and flows, 33-35, 71-72
subpopulations and, 229-232
substitution effect, 2, 3, 39, 47-48, 50-51, 52-53, 58, 59-62
superlative indexes, 50-51, 53, 83-85
taste changes, 2, 53, 59, 64, 67, 69-70
theoretical, 39, 40, 43-58, 73, 74-93
virtual demand for new commodities, 158 n.6
Conditional cost-of-living index (CCOLI), 39, 65-68, 69, 70, 86-90, 306
Congressional Budget Office, 259
Conrad, Kent, 228
Constant-elasticity-of-substitution (CES) price index, 6, 60-61, 91-93, 194
Constant utility index, 14
Consumer demand functions, 49-50, 306
Consumer Expenditure Survey (CEX), 42, 79, 213
accuracy, 12, 36, 253-256, 261
description of, 189, 238, 244, 280-281
expenditure weights, 11-12, 36, 253-256, 261, 274-275
frequency, 164-165, 256-257, 275
NIPA expenditure estimates compared, 214
POPS integrated with, 37, 264-266, 275
Quarterly Interview Panel Survey, 257, 280
questionnaire and structural issues, 36, 261- 262
research needs, 11-12, 261, 274-275
sample size, 12, 36, 131 n.25, 257-261
scanner technology and, 271-272
subgroup data, 4, 203 n.11, 227, 234, 236, 247, 248, 255, 259
substitution with new goods, 164-165
Consumer Price Index (CPI)
aggregation in, 15, 23-24, 243-244, 305, 308, 311
COLI-based, 2-3, 4, 14, 15, 18-19, 24, 94, 104, 110 n.3, 112, 144-145, 272-273
comparison period, 42
conceptual basis, 1-2, 8, 15-16, 18-19, 38, 39, 41, 42, 73, 94, 221
criticisms of, 1, 13, 14, 27, 39
defined, 306
domain, 3-4, 16, 17, 19-21, 73, 94, 105
experimental version (CPI-E), 11, 197, 203 n.11, 228, 246-250, 307
fixed-weight method, 14-15
growth of, 207-208
hedonic quality adjustment, 6-7, 132-137, 138, 139-140, 141
Housing Survey, 307
improvement initiative, 131 n.25, 145, 164, 166 n.14
introduction of new goods, 157, 161-167
item replacement, 134, 305-306, 307-308
item strata, 23, 130, 131, 156, 163, 307, 309
modified Laspeyres-based, 24, 49, 52, 61, 62, 97 n.2, 104, 111, 114, 221, 276-277, 306, 309
product sampling and item identification, 107-108, 250
quality adjustments, 14, 16, 27, 39, 106, 107, 110 n.3, 111, 112-122, 116-121, 130-137, 209-210
quantity-base period, 276-277
recalculation (CPI-U-RS), 202 n.8, 220, 307
research series, 210
revision frequency, 115, 166 n.13, 221
structure and elements, 23-24, 156, 163, 278-280, 307, 309
theoretical basis, 73
urban sample (CPI-U), 197-198, 203 n.11, 207, 211, 228, 247, 249, 250, 257, 307
wage-earner sample (CPI-W), 197-198, 203 n.11, 207, 228, 246, 250, 257, 307
weights/weighting, 11-12, 14, 15, 26, 104, 163, 179, 180, 198, 227, 307
Consumer substitution
COGI and, 5, 21-23, 25, 59, 70
COLI and, 2, 6, 25, 39, 47-48, 50-51, 52- 53, 57, 58, 59-62, 66, 90
conceptual issues, 2, 3, 39, 47-48, 50-51, 52-53, 58, 59-62, 242
defined, 306
full-service retail to discount outlets, 169- 170, 173
standard of living and, 73, 215 n.24
superlative index and, 5-6, 23, 25, 60, 61, 84, 85, 93, 96, 113 n.6, 215
Contingent valuation, 98
Contract rents, 307
Cost functions, 80, 82, 83-84, 85, 86, 91-92
conditional, 88-90
Gorman polar form, 245
rationed, 90
Cost-of-goods index (COGI). See also Laspeyres index;
Paasche indexes
augmented, 103
bias, 59
COLI compared, 2-3, 16, 18-19, 24, 38-39, 57-72
comparison period, 16, 21-23, 41, 42, 74
conceptual bases, 2-3, 14, 16, 18-19, 38-39, 41, 42-46, 47, 48-49, 50, 57, 74-79
item replacement, 111-112
mathematical approach, 74-79
objectives, 16
outlet substitution bias, 8, 172, 176
public understanding of, 58
quality adjustment, 62-64, 111-112, 123
rationale for, 43
reference period, 16, 21-23, 41, 74
and substitution, 5, 21-23, 59, 70, 224
theory, 43-46
time reversal test, 76-77
Cost-of-living index (COLI)
aggregation, 4, 15, 51-52, 53, 61-62, 85-86, 242
base period, 80-81, 82, 91, 92
calculation, 43-44, 49-50, 172
CES, 91-93
COGI compared, 2-3, 16, 18-19, 24, 38-39, 57-72
comparison period, 41, 48-49, 51, 53
compensation calculation, 48, 51, 58, 61, 70-71, 81, 153
conceptual bases, 2-3, 14, 15, 16, 18-19, 38-39, 41, 43, 46-53, 57, 58, 65-68, 69, 79-93, 283-292
conditional, 3, 4, 39, 65-68, 69, 70, 73, 86- 90, 94-96, 115, 306
cost/expenditure function, 80, 82, 83-84, 85, 86, 89-90
criticisms and controversies, 15-16, 52-53
data collection, 289-292
demand functions, 49-50, 63, 83, 84
domain, 3-4, 17, 19-21, 39, 65-68, 69, 70, 73, 86-90, 94-100, 104, 306
expenditure, 195
Fisher ideal index as, 50, 52, 60, 286, 287, 288
geometric means formula, 5, 23, 24, 39, 50, 60, 77, 127, 210, 215 n.24, 279-280, 308
homotheticity of preferences, 49, 50-51, 60, 82, 84, 308
indifference curve, 80, 86, 90, 91
item replacement methods, 110
Laspeyres–Paasche index relationship in, 23, 47, 48-49, 51, 80-82, 87, 90-91, 285, 287-289
mathematical approach, 79-83, 90-91
multiperiod, 104 n.10
outlet substitution bias, 8, 168, 172, 174, 176
plutocratic, 52, 242, 244, 287-288, 292
public understanding of, 58-59
quality adjustment, 2, 3, 18-19, 39, 57, 62- 64, 86-90, 109-114, 115, 123, 168
reference period, 41, 47-49, 51-52, 53, 82
representative consumer, 241-246
satisfaction-based, 55-57
standard-of-living measurement, 3, 15 n.2, 19, 41, 46-47, 48, 49, 55-56, 59, 63, 69, 80, 82, 95
statistical definition and estimation of, 283- 291
substitution effects, 3, 6, 15-16, 39, 47-48, 50-51, 52-53, 57, 58, 59-62, 66, 90, 224
superlative indexes as, 50-51, 57
and taste change, 2, 16, 24, 69-70
Taylor series approximation, 90-91
theoretical bases, 2, 4, 15, 19, 40, 46-53, 58, 79, 83, 110, 113
unconditional, 4, 17, 66, 68, 69, 70, 73, 96- 98, 115
utility function, 53-55, 79-80, 82, 83-84, 85, 86-87
Crime rates, 4, 20, 73, 95, 97, 98
Cross-outlet price linking, 169, 171
Current Population Survey (CPS), 201-202, 234, 274
D
Data collection for CPI, 306
C&S Survey, 11, 36, 37, 252, 263, 281-282
CEX, 11-12, 24, 36, 213, 227, 234, 236, 241, 244, 252-263, 271-272, 274, 280- 281
and conceptual bases for indexes, 15, 42-43, 50, 197
for democratic indexes, 215-216, 223
for hedonic quality change adjustments, 124, 126 n.19, 128-129, 131-132, 135, 143, 144
heterogeneity of consumers and, 27, 223, 231, 241
integrated CEX/POPS, 37, 264-266, 271, 275
lagged, 6, 15, 25, 31-32, 42-43, 50, 57, 61, 76, 129, 144, 165, 183, 219-220, 256- 257
from manufacturers/vendors, 132 n.26
modified Laspeyres, 276-277
nonsampling errors, 260 n.5
POPS/TPOPS, 11, 36-37, 163-164, 167- 168, 227 n.3, 232, 233 n.5, 234, 262, 267, 281-282, 310
recommendations, 5, 11-12, 241, 261, 274- 276
sample rotation, 8, 31, 33, 119-120, 140, 156, 157, 163, 164, 165, 167, 172
sampling errors, 260 n.5
with scanners, 5, 43, 45, 129, 142 n.35, 197, 233, 234, 235, 236, 241, 266-273, 275, 289, 291
Standard Industrial Classification system, 264
for subgroup indexes, 4, 5, 27, 197, 226- 228, 229, 231-235, 241
Deletion method, 117, 118, 119-120, 125, 128, 135, 136-137, 139, 305, 307
Demand
for new commodities, 158 n.6, 159-160
Democratic indexes
aggregation, 4, 5, 26-27, 45, 77-79, 86, 235 n.9
data collection for, 215-216, 223, 252, 270- 271
for public transfer program indexing, 198- 199
for subgroups, 5, 26-27, 229, 237-240
Demographic issues, and index construction, 24-25, 26, 32, 53, 110, 172-173
Design of indexes. See also Conceptual bases for indexes;
Domain of indexes;
Public transfer payment indexing;
Social security benefits
inflation indicators, 216-221
limits on, 35
for monetary policy setting, 35, 40, 192, 216-221
as output deflator, 35, 214-216, 218
for poverty line, 40
for private contracts, 35, 192, 208-210, 218
for social security compensation, 11, 35, 40, 43, 48, 192
tax-related, 35, 40, 43, 192, 212-214
wage-related, 11, 35, 199-206, 207-208
Diewert, W. Erwin, 23
Direct characteristics method, 126, 128-129, 133, 142, 143-144, 152-154
Direct comparison method, 109, 116-118, 139, 307
Direct consumption costs, 213
Direct time dummy method, 126-128, 143, 145-146, 151-152, 153
Directed reinitiation, 155 n.1
Disaggregation of households, 45
Domain of indexes. See also Design of indexes
compensation issues, 21, 70, 103-105
conceptual issues, 3, 65-68, 94, 96-98
conditional COLI, 4, 39, 65-68, 69, 70, 73, 86-90, 95-96, 306
CPI, 3-4, 16, 17, 19-21, 73, 94, 105
cross-place comparisons, 66-67
current practice, 65
and economic indicators, 97
employer-paid benefits, 21, 98, 103-105
environmental variables, 4, 16, 19-20, 66- 67, 73, 94-102, 105
MCPI, 9, 10, 95, 97-98, 178-179, 185-186, 189-190, 220
measurement problems, 20, 21, 97, 98-102
NIPA, 220
public goods, 4, 19-21, 94, 96, 98-102, 104
and public transfer programs, 97
quality changes and, 67, 95, 97-98, 101
separability issue, 68
superlative indexes, 95-96
supplemental indexes and satellite accounts, 4, 101-102, 103, 105
technological changes and, 67-68, 88-89, 97
unconditional COLI, 4, 17, 66, 68, 69, 70, 96-98
E
e-Commerce, 170-173
Econometric modeling
of demand functions, 49-50, 63
of new goods, 160
of quality adjustments, 63, 64, 139, 145-146
Economic theory of consumer behavior, 2, 19, 40, 46-53, 58, 79, 83, 110, 242, 243
Elderly, price indexes for, 11, 196-197, 199, 207, 228-229, 249-251
Employer-paid benefits, 9, 10, 21, 98, 103-105, 179, 201, 220
Employment Cost Index (ECI), 201
Entry-level items (ELI), 136, 140, 155 n.1, 164, 165, 167, 234, 236, 262, 307
Environmental (outside) variables
benefit—cost assessment, 100 n.7
conceptual issues, 66-67, 69, 94-98
measurement, 16, 19, 20-21, 98-102
superlative indexes and, 53
theoretical framework, 86-87, 88
Expenditure function, 80
Expenditure weight, 26-27, 52, 86, 166, 167, 307
Expenditure-weighted averaging, 26, 52, 60
F
Fads, 159 n.7
Federal income tax system. See Taxes
Fisher ideal index
for aggregation, 52, 86, 215, 221, 248
construction approach, 42-43, 50
introduction of new goods, 162 n.10
mathematical approach, 77, 83-84, 85
plutocratic, 79
production lag, 42-43
publication of research series, 210
quality change adjustment, 152, 153
real-time, 219-220
Fixed-weight index, 308
Food and beverages, 64, 83, 112, 117, 146, 159, 160, 170, 173, 174
G
Geometric means formula, 5, 23, 24, 39, 50, 60, 77, 127, 210, 215 n.24, 308
Gillingham-Greenlees exact index, 213-214
“Goodness” of goods, 64
Griliches neutrality, 151, 152
Gross domestic product (GDP), 13-14, 98 n.4, 100, 179, 209, 211, 216, 217, 218, 220, 221, 240
Group indexes. See Subgroup indexes
H
Health insurance, 9, 10, 21, 104-105, 179-180, 185-188, 189, 203, 220
Health status, as utility function, 87-90, 95, 187
Hedonic quality adjustment, 64
advantages, 123
assessment of methods, 7, 145-146
audit of other methods with, 6, 120, 128
backward-looking method, 150
bias in, 128, 129, 133, 139, 140
BLS application of, 108, 113 n.6, 129-140
brand-specific, 132-133, 145-146
candidates for, 28-29, 119, 124, 130-132, 142
characteristics method, 126, 128-129, 133, 142, 143-144, 152-154
comparability decisions for, 6, 28, 29, 134- 139, 140, 142, 145
complementary products, 142-143
consumer heterogeneity and, 124-125
CPI model, 6-7, 132-137, 138, 139-140, 141
data requirements, 124, 126 n.19, 128-129, 131-132, 135, 143, 144, 269
defined, 101
direct methods, 29, 121, 126-129, 134, 143- 144, 151-154, 306, 307
forward-looking method, 150
indirect methods, 29, 125-126, 127 n.22, 129, 130, 132, 134, 135-136, 144, 150- 151, 308-309
limitations of methods, 140
list price vs. transaction price, 132
mathematical description of, 123-124, 149- 154
in MCPI, 187-188
new goods and, 7
outlet substitution and, 174, 176
panel cautions, 6-7, 133-134, 139-140, 141, 144-145
time dummy method, 126-128, 143, 145- 146, 151-152, 153
updating intensities, 144
uses, 29, 122, 123, 124, 130, 135
Hedonic treadmill hypothesis, 56, 69-70
Heterogeneity. See also Subgroup indexes
across-stratum, 223-224, 227, 229
and aggregation, 4, 26, 125 n.18, 223-226, 229, 240-241
and construction of indexes, 18, 26, 226, 240-241
and data collection methods, 223, 241
and hedonic quality adjustment methods, 124-125
and inflation rates, 222, 225-226
and outcomes-adjusted medical index, 184
in prices paid, 46, 225-226, 227 n.3
public goods preferences, 99 n.6
in substitution behavior, 26, 224
Household
aggregation across, 4, 223-226, 240-246
disaggregation into individual members, 45
furnishings and equipment, 72, 254
modeling non-unitary behavior, 45
production function, 123 n.16
scanner technology, 271-272
Housing. See Shelter
I
Imputation of prices, 121, 136, 159, 305
Income distribution, 24-25, 26, 53, 199, 206, 227, 239-240, 243
Index drift, 167, 168 n.17, 257, 308
Inflation rates
age stratification, 246, 249-251
core, 218
effects of bias in indexes, 217-218
heterogeneity and, 222, 225-226
income stratification, 239-240, 247-249
long-run, 61
macroeconomic policy indicators, 1, 97, 198, 216-221
NIPA vs. CPI, 217
quality change adjustments and, 27, 225
and relative price variation, 225
stripped, 218-219
subgroup differences, 222, 239-240, 246- 251
tax-rate indexing, 13, 40, 43, 212-214, 222
Treasury securities indexed to, 1, 192, 210- 212
Information Resources, Inc., 266, 271
Input substitution, 10, 181-184, 188-189
Interest rates (nominal), 72
Item reclassification, 31, 155, 162, 163, 165- 166, 167
Item replacement. See also Substitution
class-mean method, 117, 118, 119, 121, 134 n.30, 136-137, 139, 305-306
COLI calculations, 110
comparability decisions by analysts, 6, 28, 29, 116-117, 118, 134-139, 140, 142, 145
deletion method, 117, 118, 119-120, 125, 128, 135, 136-137, 139, 305, 307
direct comparison method, 109, 116-118, 139, 307
explicit cost-based adjustment, 28-29, 118- 119, 125, 134, 307-308
in-store procedure, 125, 126, 134, 156
overlap pricing, 117, 118, 119, 310
quality adjustments, 28-29, 31, 106, 110, 116-121, 125, 130-132, 135, 156
research recommendations, 141
targeted, 8, 130-132, 164, 166
Item strata, 23, 156, 162, 164, 167, 307, 309, 311
K
Konus, Alexander, 23
L
Laspeyres index, 308
and COLI, 47, 48-49, 50, 51, 53, 59, 80-82, 87, 90-91
complexity, 58
conceptual basis, 42
democratic, 242
domain, 68
as inflation indicator, 218, 247, 248
introduction of new goods, 158 n.6, 161- 162
mathematical approach, 74-79
modified for CPI, 25, 62, 97 n.2, 111, 114, 168 n.17, 272-273, 306, 309
national vs. individual, 44-46, 78
outlet rotation and, 168 n.17
quality adjustments, 111-112, 129, 152, 153, 154
quantity used for pricing, 72, 78, 82-83
representative agent, 246, 247, 248
seasoned, 62
substitution bias, 5, 21-23, 24, 59, 60, 62, 251 n.20
utility function, 92
Law of one price, 169 n.18, 172, 180, 187
Life expectancy, 4, 20, 28, 67, 73, 96, 97-98, 184
Link period, 309
M
Macroeconomic policy, inflation indicators for, 1, 35, 40, 97, 192, 216-221
Marshall Edgeworth price index, 77
Medical Care Price Index (MCPI)
consumer heterogeneity and, 224, 228
current procedures, 178-181
data collection, 9, 183, 255-256
defined, 309
diagnosis-based pricing, 9, 182-184, 188-189
domain, 9, 10, 20 n.5, 86-90, 96, 97-98, 105, 178-179, 185-186, 189-190, 220
for the elderly, 197, 203, 249, 250-251
health insurance considerations, 9, 10, 21, 104-105, 179-180, 185-188, 189, 220, 255
hospital and physician services, 30, 112, 148, 181
input substitution, 10, 181-182, 188-189
measurement issues, 17-18, 181-185
outcomes-adjusted, 10, 181, 184, 187, 190
prescription drugs, 30, 112, 148, 163, 186
quality adjustments, 10, 19, 20 n.5, 28, 30, 40, 67, 86-90, 112, 114, 117, 148, 181, 184-185, 187-188, 190
recommendations, 9-10, 105, 188-190
weights, 9, 179, 180, 182, 183, 184, 185, 186, 189, 203, 214 n.22, 220, 255
Medicare and Medicaid, 9, 180, 182, 185, 203, 214 n.22, 220, 225, 255
Microwave ovens, 29, 116, 118, 131, 133, 137- 138
Motor vehicle accident rates, 96
N
National Bureau of Economic Research, 311
National economic accounts, 4, 20, 101-102, 105
National Income and Products Accounts, 89, 102 n.8, 179, 203, 214-215, 216, 217, 219-221, 253, 254
National price indexes, 4, 8, 25, 26, 44-46, 78- 79, 87, 160, 214, 219-221
New goods
bias, 31, 32, 107-108, 112-121, 146-148, 156-158, 160-161, 162, 273
data collection issues, 30-32, 163-165, 273
improved goods contrasted, 106-107
introduction into index, 7-8, 31-32, 97-98, 111, 112, 120 n.12, 131 n.25, 135, 155 n.1, 161-167
item reclassification, 31, 155, 162, 163, 165-166, 167
outlet rotation and, 7, 31, 32, 135, 155, 164, 168
in output-change indexes, 215, 216
plutocratic vs. democratic index, 160 n.8, 162
quality-improved items, 31, 156, 161
recommended adjustments for, 8, 160-161, 165
sample rotation frequency, 8, 31, 163-164, 165, 167
supplemental, 107, 155 n.1, 163
valuation of, 3, 18, 64, 73, 110, 155, 157-161
variety considerations, 110 n.3, 114, 146
virtual price vs. introductory price, 8, 31, 157-160, 311
weight updating, 32, 155, 163, 166, 167
welfare effects, 31, 157, 159, 160
New outlets. See Outlet rotation;
Outlet substitution
Nonlinear pricing, 107
Nonsampling errors, 260 n.5
Norwood, Janet, 228
O
Outcome pricing, 190
Output deflation, 1, 13-14, 35, 98, 101-102, 214-216, 218, 240
Outlet rotation
cross-outlet price linking, 169, 171
current practice, 167-173
defined, 309
e-commerce and, 170-173
hedonic techniques applied to, 174, 176
market shift to discount stores and, 8, 33, 169-170, 173, 176
new-product introduction, 7, 31, 32, 135, 155, 164, 168
pricing components, 9, 171, 172, 174-175, 176, 263
probability of selection, 167-168
purpose, 167-168
quality-related issues, 8-9, 32-33, 168-170, 171, 172, 173, 174-175, 176
Outlet substitution, 8, 128, 168-170, 172, 173- 174, 176, 224, 230, 273, 310
Overlap pricing, 117, 118, 119, 176, 310
P
Paasche indexes, 308
aggregation, 77-79
averaging, 79
COLI and, 48-49, 50, 51, 53, 80-82, 87, 91
conceptual basis, 42
democratic, 79
introduction of new goods, 158 n.6, 162
mathematical approach, 75-79, 91
national vs. individual, 79
quality adjustments, 129, 152, 153, 154
representative agent, 246, 247, 248
substitution bias, 22-23, 251 n.20
usefulness, 57
utility function, 92
Penetration pricing, 163 n.11
Pension plans, employer-provided, 104, 203- 204
Personal consumption expenditure (PCE) data, 12, 37, 253-256, 274-275, 310
Personal consumption expenditure (PCE)
Plutocratic indexes
aggregation, 4, 5, 26-27, 45, 77-79, 86, 235 n.9
bias, 244
introduction of new goods, 160 n.8, 162
output-change measurement, 215
for public transfer program indexing, 198- 199
for subgroups, 5, 26-27, 229, 237-240
Point of Purchase Survey (POPS/TPOPS), 11, 36-37, 163, 167-168, 227 n.3, 232, 233 n.5, 234, 262, 264-266, 272, 281-282, 310
Pollution, 4, 97, 98, 101-102, 103
Preferences
and COLI, 47, 49, 50, 54, 79-80
flexible functional form, 84, 86, 142 n.35
homothetic, 49, 50-51, 60, 82, 84, 92, 308
separability of, 68
Price heterogeneity, 46, 225-226
Private contracts, indexing, 35, 97, 192, 208- 210, 218
Private goods
as bundles of characteristics, 122-123
characteristics, 108, 111, 112
domain of CPI, 4
government-produced and -sold, 19, 20, 94 n.1
separability from public goods, 68
Producer price index (PPI), 130, 148, 174 n.23, 209, 219, 220
Public goods
domain considerations, 19, 20-21, 94, 96, 98-100, 102-103, 104
pure, 21
separability from private goods, 68, 103
valuation problems, 19, 98-100
Public perceptions
of quality, 111
Public transfer payment indexing, 13
beneficiaries with other income, 195-197
consumer heterogeneity and, 226, 231
criticisms of CPI, 13
domain issues, 97
for elderly people, 196-197, 207
lagged superlative index for escalation, 24, 25, 191, 194-195
plutocratic vs. democratic indexes, 198-199, 240
poverty-related programs, 206-207, 247
recommendations, 194-195
social security adjustments, 13, 25, 193- 199, 200, 204-206
for subgroups, 192-193, 206, 231
tax considerations, 195-196
wage indexes, 199-206
Pure price changes, 29, 127, 216, 230
Q
Quality change adjustments
and aggregation, 125 n.18
appliances and electronics, 29, 107, 109, 110, 114, 118, 120 n.12, 130, 131, 132, 133, 147
bias in, 27-28, 112-114, 121-122, 129, 133, 139, 140, 144, 249
BLS approaches, 39, 73, 114-122, 129-140
Boskin Commission criticisms, 27-28, 109 n.2, 112-114, 115, 116-117, 119, 120, 146-148
COLI view, 2, 3, 18-19, 39, 57, 62-64, 86- 90, 109-111, 112-114, 115
conceptual issues, 14, 19, 28, 30, 39, 40, 57, 59, 62-64, 98, 106
cost-based, 28-29, 118-119, 125, 134, 307- 308
in CPI, 14, 16, 18-19, 27, 39, 106, 111, 112-114, 115, 116-121, 130-137, 209- 210
defined, 114
domain issues, 67, 95, 97-98, 101, 115
durability of goods and, 71-72
food and beverages, 64, 108, 112, 117, 123, 146
forms of, 106-107
item replacement methods, 27, 28-29, 31, 106, 110, 111, 116-121, 134, 140-141
items targeted for, 130-132
measurement/modeling, 28-30, 63-64, 108, 122;
see also Hedonic quality adjustment
medical care, 10, 19, 20 n.5, 28, 30, 40, 67, 86-90, 96, 112, 114, 117, 148, 184-185, 187-188, 190
new goods bias, 31, 107-108, 112-114, 115, 146-148, 156, 161
outlet rotation and, 8-9, 168-170, 171, 172, 173, 174-175, 176
per unit approximations, 107
private contracts, 209-210
recommendations and cautions, 140-146
repackaging framework, 107-108, 111-112, 116-117, 156
for services, 115, 122, 141-142, 148, 168
shelter, 146-147
subgroup indexes and, 230
taste change and, 16, 64, 69, 95, 111
transportation, 28-29, 109, 110, 111, 117, 119, 123, 147-148
valuation of new goods, 3, 18, 64, 73, 156
variety of goods and, 110 n.3, 114 n.8
within-sample, 115, 121-122, 140, 156
Quality-of-life metrics, 185
R
Reference period, 306, 309, 310, 311
conceptual issues, 41, 42, 47-49, 51
hedonic function, 125
Regional/city price indexes, 66-67, 237, 252
Representative consumer, 241-243
COLI for, 244-246
conditions for existence of, 243-244
Retail Trade Survey, 255
S
Sample rotation, 8, 31, 33, 119-120, 140, 156, 157, 163-164, 165, 167, 172
Sampling errors, 260 n.5
Satellite accounts, 4, 101-102, 103, 105
Satisfaction. See also Utility
hedonic treadmill hypothesis, 56, 69-70
measures of, 55-57
and utility, 55-57
Scanner data
and COLI-based CPI, 272-273, 275
and hedonic modeling, 142 n.35
household-based technology, 271-272, 275
limitations, 270-271
and quality of CEX and POPS, 272
Seasoning procedure, 62
Semiconductors, 162
Separability of preferences, 68
Services
expenditure categories, 115, 122, 141, 148
flows from consumer capital goods, 33-35, 71-72, 102
Shelter
compensation issues, 70-71
consumer heterogeneity and, 224, 236 n.11
data collection, 254, 256, 262 n.6, 263
homeowners vs. renters, 70-71, 72
item category, 307
outlet substitution and, 170
quality adjustments, 29, 130, 146-147
service flows from housing, 33-35
Shephard’s Lemma, 82-83, 90, 91
Social cost-of-living index, 51-52, 85-86, 242
Social issues, 96
Social security benefits
aggregation issues, 4, 200-201
bias in CPI, 14
consumer heterogeneity and, 226
cost-of-living adjustments, 1, 11, 13, 25, 40, 48, 61, 193-195, 198, 240
CPI-U tied to, 198
democratic vs. plutocratic weights, 240
design of indexes, 11, 35, 40, 43, 48, 192
employers’ contributions to, 104
initial retirement benefit, 200
other income with, 71, 195-197
rate of increase, 205-206
superlative index for escalation, 11, 6, 25, 61, 198
tax-and-price index tied to, 195-196
timeliness of data collection, 6, 43
wage-based indexing, 11, 199, 200-201, 204-206, 246 n.17
Standard of living
defined, 311
environmental considerations, 19, 95, 96-97
measurement for COLI, 15 n.2, 41, 46-47, 48, 49, 55-56, 59, 63, 69, 80
public goods and, 98
quality of goods and, 63
satisfaction and, 55-56
social security recipients, 71, 97
substitution behavior and, 73
Stigler committee, 1, 3, 14, 38, 73, 122 n.14, 311
Stochastic approach, 41-42, 68
Stocks and flows, 33-35, 71-72, 102
Subgroup indexes. See also Aggregation;
Heterogeneity
aggregation issues, 4, 5, 26-27, 229
assembly of data for, 232-235
barriers to production, 226-228
conceptual bases, 229-232
costs, 232-235
data collection, 4, 5, 27, 197, 226-228, 229, 231-235, 252, 276
for elderly people, 11, 27, 125, 196-197, 199, 227, 228-229, 231, 249-251
income-stratified, 27, 125, 206-207, 227, 231, 247-249
inflation rates and, 246-251
plutocratic vs. democratic weights, 5, 26- 27, 229, 235 n.9, 237-240
and quality changes, 125, 230, 251
with reference-period weights, 194
research and testing suggestions, 235-237
of strata prices, 234, 238-239
uses, 231
Substitution. See also Consumer substitution
and aggregation, 24-25, 26, 52
bias, 59-62, 93, 113, 128, 147, 168 n.16, 170, 172, 173-174, 248 n.18
CPI, 15-16, 23-25, 113, 224, 230
data collection methods and, 269
elasticity of, 6, 60-61, 91-93, 194, 269
new goods, 164-165
outlet, 118, 128, 135, 168 n.16, 170, 172, 173-174, 310
upper-level, 311
within-strata effect, 5
Superlative indexes. See also Fisher ideal index;
Törnqvist index;
Walsh price index
advance estimate of, 195
as COLI approximation, 50-51, 57, 95-96
compensation calculations, 60, 61, 194-195
conceptual bases, 50-51, 53, 83-85
data collection for, 259, 272-273
domain, 95-96
endorsement for CPI, 97 n.2
environmental variables, 53, 87, 95-96
as inflation indicator, 218, 248
introduction of new goods, 162 n.10
lagged for escalation, 24, 25, 191, 194-195, 207-208, 210
mathematical approach, 83-85
from social aggregate indexes, 86
for social security cost-of-living adjustments, 11, 6, 25, 61, 198
substitution effect, 5, 6, 23, 24, 25, 60, 61, 84, 85, 93, 96, 113 n.6, 215
taste changes and, 25
Supplemental goods, 107, 155 n.1, 163
Supplemental Security Income (SSI), 206-207
T
Taste changes
COGI vs. COLI, 2, 16, 24-25, 69-70
conceptual issues, 53, 59, 64, 67, 69-70
habit formation, 70
and quality changes, 16, 64, 69, 110 n.3
and substitution effect, 25
Tax-and-price index, 195-196
Taxes
aggregation across households, 4
consumer heterogeneity and, 226
data collection issues, 270
democratic vs. plutocratic weights, 240
design of indexes, 35, 40, 43, 192, 212-214
direct consumption costs, 213
domain issues, 20-21, 97, 102-103
exact indexation measure, 213-214
public goods offset to, 20-21, 102-103
and public transfer program indexing, 97, 195-196
rate-related indexing, 13, 40, 43, 212-214
Taylor series approximation, 90-91
domain issues, 67-68, 88-89, 97
“new goods” effect, 67-68, 162
Televisions, 29, 110, 130, 133, 135, 137, 142, 147
Test approach, 41-42, 50, 68, 267
Theoretical bases of indexes
basket-price, 43-46
and conceptual basis, 39, 40, 43-58, 73, 74- 93
cost-of-living, 2, 15, 40, 46-53, 58, 79, 83, 86, 110, 113
utility and choice and, 47, 53-55, 110 n.3
Tiebout hypothesis, 99 n.6
Time reversal test, 76-77
Törnqvist index, 85, 93, 248, 311
Transfer payments. See Public transfer payment indexing ;
Social security benefits;
specific programs
Transportation, 72, 109, 112, 117, 122, 147- 148, 173, 233 n.7
Treasury Department, 259
Treasury Inflation-Protected Securities (TIPS), 1, 192, 210-212
U
Union wage contracts, 13, 207-208, 218
Unit pricing, 268-269
Unit value indexes, 236
Utility
and choice, 47, 53-55, 110 n.3
duration neglect bias, 54
environmental factors and, 86-87
function, 79-80, 83-84, 85, 86-90, 92
predicted, 54
remembered, 54
satisfaction and, 55-57
V
Variety of goods, 110 n.3, 114, 146
VCRs, 8, 31, 115, 131, 132, 133, 137, 138, 139, 156, 162, 163, 165, 166
Virtual price, 8, 31, 157-160, 311
W
Wage indexes
aggregation issues, 200-201
alternatives, 199-206
design issues, 11, 35, 199-206, 207-208
employer-paid benefits in, 201-204
escalators in union contracts, 13, 207-208
hourly earnings, 202 n.9
mean wage measure, 202, 203 n.10
quality adjustments in, 204
social security benefits tied to, 11, 199, 200, 204-206
Weighted arithmetic mean, 75, 215 n.24
Weighted harmonic mean, 75, 79
Weights/weighting
across-stratum, 227
expenditure, 26, 45, 60, 76 n.1, 86, 166, 167, 198, 227, 307
fixed-weight index, 308
item (upper-level), 97 n.2, 309
MCPI, 9, 179, 180, 182, 183, 184, 185, 186, 189, 214 n.22, 220
for new products, 8, 32, 155, 163, 166, 167
plutocratic, 45, 78, 79, 237-240
updating, 8, 32, 96, 155, 163, 166, 167
Welfare effects, 31, 157, 159, 160, 242
Welfare index, 14
Well-being, inputs to, 109-110, 115
Within-sample
