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Quantifying Quality Growth

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Author Info
Mark Bils
Peter J. Klenow

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Abstract

Using U.S. Consumer Expenditure Surveys, we estimate "quality Engel curves" for 66 durable goods based on the extent richer households pay more for each good. The same data show that the average price paid rises faster from 1980 to 1996 for goods with steeper quality Engel curves, as if households are ascending these curves. BLS prices likewise increase more quickly for goods with steeper quality Engel curves, suggesting the BLS does not fully net out the impact of quality upgrading. We estimate that annual quality growth averages 3.7 percent for our goods, with 2.2 percent showing up as higher inflation.

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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 91 (2001)
Issue (Month): 4 (September)
Pages: 1006-1030
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Handle: RePEc:aea:aecrev:v:91:y:2001:i:4:p:1006-1030

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb.. [Downloadable!] (restricted)
  2. Randolph, William C, 1988. "Housing Depreciation and Aging Bias in the Consumer Price Index," Journal of Business & Economic Statistics, American Statistical Association, vol. 6(3), pages 359-71, July.
  3. Matthew D. Shapiro & David W. Wilcox, 1997. "Mismeasurement in the Consumer Price Index: An Evaluation," NBER Working Papers 5590, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Mark Bils & Peter J. Klenow, 1998. "Using Consumer Theory to Test Competing Business Cycle Models," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 233-261, April. [Downloadable!] (restricted)
  5. Steven Berry & Samuel Kortum & Ariel Pakes, 1996. "Environmental Change and Hedonic Cost Functions for Automobiles," NBER Working Papers 5746, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. David M. Cutler & Mark McClellan & Joseph P. Newhouse & Dahlia Remler, 1996. "Are Medical Prices Declining?," NBER Working Papers 5750, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Goldberg, Pinelopi Koujianou, 1996. "Dealer Price Discrimination in New Car Purchases: Evidence from the Consumer Expenditure Survey," Journal of Political Economy, University of Chicago Press, vol. 104(3), pages 622-54, June. [Downloadable!] (restricted)
  8. Griliches, Zvi & Cockburn, Iain, 1994. "Generics and New Goods in Pharmaceutical Price Indexes," American Economic Review, American Economic Association, vol. 84(5), pages 1213-32, December. [Downloadable!] (restricted)
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  9. Manuel Trajtenberg, 1990. "Product Innovations, Price Indices and the (Mis)Measurement of Economic Performance," NBER Working Papers 3261, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Kornprobst, Wolfgang, 2006. "Das Romer-Modell mit qualitätsverbesserndem technischen Fortschritt," Regensburger Diskussionsbeiträge zur Wirtschaftswissenschaft 412, University of Regensburg, Department of Economics. [Downloadable!]
  2. Jan Hanousek & Randall K. Filer, 2004. "Consumers' Opinion of Inflation Bias Due to Quality Improvements," William Davidson Institute Working Papers Series 2004-681, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
    Other versions:
  3. Bart Hobijn, 2002. "On both sides of the quality bias in price indexes," Staff Reports 157, Federal Reserve Bank of New York. [Downloadable!]
  4. Svedberg, Peter & Tilton, John, 2003. "The Real Real Price of Nonrenewable Resources: Copper 1870-2000," Seminar Papers 723, Stockholm University, Institute for International Economic Studies. [Downloadable!]
  5. Karen Kopecky, 2005. "The Trend in Retirement," Economie d'Avant Garde Research Reports 12, Economie d'Avant Garde. [Downloadable!]
    Other versions:
  6. Mauro Caminati, 2004. "Variety, Consumption and Growth," Department of Economics University of Siena 431, Department of Economics, University of Siena. [Downloadable!]
  7. Marcos Chamon & Irineu de Carvalho Filho, 2006. "The Myth of Post-Reform Income Stagnation in Brazil," IMF Working Papers 06/275, International Monetary Fund. [Downloadable!]
  8. Nguyen, Thang, 2005. "Separating Productivity and Quality Effects from Relative Prices," MPRA Paper 225, University Library of Munich, Germany, revised 01 Nov 2006. [Downloadable!]
  9. Yo Chul Choi & David Hummels & Chong Xiang, 2006. "Explaining Import Variety and Quality: The Role of the Income Distribution," NBER Working Papers 12531, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Mark A. Wynne, 2005. "An estimate of the measurement bias in the HICP," Working Papers 05-09, Federal Reserve Bank of Dallas. [Downloadable!]
  11. Juan Carlos Hallak, 2006. "A Product-Quality View of the Linder Hypothesis," NBER Working Papers 12712, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. Svedberg, Peter, 2003. "World Income Distribution: Which Way?," Seminar Papers 724, Stockholm University, Institute for International Economic Studies. [Downloadable!]
  13. David E. Lebow & Jeremy B. Rudd, 2001. "Measurement error in the consumer price index: where do we stand?," Finance and Economics Discussion Series 2001-61, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  14. Linnea Polgreen & Pedro Silos, 2008. "Capital-Skill Complementarity and Inequality: A Sensitivity Analysis," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(2), pages 302-313, April. [Downloadable!] (restricted)
    Other versions:
  15. Andreas Hornstein & Per Krusell, 2000. "The IT revolution : is it evident in the productivity numbers?," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 49-78. [Downloadable!]
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