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Quantifying Quality Growth

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  • Mark Bils
  • Peter J. Klenow

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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Bibliographic 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

Note: DOI: 10.1257/aer.91.4.1006
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  1. 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.
  2. Timothy F. Bresnahan & Robert J. Gordon, 1996. "The Economics of New Goods," NBER Books, National Bureau of Economic Research, Inc, number bres96-1, octubre-d.
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  7. Manuel Trajtenberg, 1990. "Product Innovations, Price Indices and the (Mis)Measurement of Economic Performance," NBER Working Papers 3261, National Bureau of Economic Research, Inc.
  8. 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.
  9. 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..
  10. Brent R. Moulton & Karin E. Moses, 1997. "Addressing the Quality Change Issue in the Consumer Price Index," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 305-366.
  11. Griliches, Z. & Cockborn, I., 1993. "Generics and New Goods in Pharmaceutical Price Indexes," Harvard Institute of Economic Research Working Papers 1664, Harvard - Institute of Economic Research.
  12. 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.
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