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Getting Prices Right: What Should Be Done?

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Deaton, Angus

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Abstract

Much of the profession accepts that the CPI likely overstates the rate of increase of the cost-of-living. It is less clear that there are sound and feasible steps that the BLS can adopt to improve matters in the short run. There are unresolved conceptual and identification problems in the measurement of quality. Superlative price indexes are not feasible, and feasible approximations are not superlative, and may not even be better. The need for a single index that aggregates over heterogeneous consumers with different incomes, tastes, and needs casts serious doubt on the cost-of-living approach. Copyright 1998 by American Economic Association.

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Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 12 (1998)
Issue (Month): 1 (Winter)
Pages: 37-46
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Handle: RePEc:aea:jecper:v:12:y:1998:i:1:p:37-46

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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. Moulton, Brent R, 1996. "Bias in the Consumer Price Index: What Is the Evidence?," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 159-77, Fall. [Downloadable!] (restricted)
  2. Jerry Hausman, 1997. "Cellular Telephone, New Products and the CPI," NBER Working Papers 5982, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Matthew D. Shapiro & David W. Wilcox, 1996. "Mismeasurement in the Consumer Price Index: An Evaluation," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 93-154 National Bureau of Economic Research, Inc. [Downloadable!]
    Other versions:
  4. Muellbauer, John, 1976. "Community Preferences and the Representative Consumer," Econometrica, Econometric Society, vol. 44(5), pages 979-99, September. [Downloadable!] (restricted)
  5. Fisher, Franklin M & Griliches, Zvi, 1995. "Aggregate Price Indices, New Goods, and Generics," The Quarterly Journal of Economics, MIT Press, vol. 110(1), pages 229-44, February. [Downloadable!] (restricted)
  6. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May. [Downloadable!] (restricted)
  7. 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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  8. Pollak, Robert A, 1980. "Group Cost-of-Living Indexes," American Economic Review, American Economic Association, vol. 70(2), pages 273-78, May. [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. Thomas F. Crossley & Krishna Pendakur, 2006. "The Social Cost-of-Living: Welfare Foundations and Estimation," Social and Economic Dimensions of an Aging Population Research Papers 155, McMaster University. [Downloadable!]
    Other versions:
  2. M. Fase, 2007. "Notes and Communications," De Economist, Springer, vol. 155(2), pages 221-238, June. [Downloadable!] (restricted)
  3. Cristina Barceló, 2006. "Housing tenure and labour mobility: a comparison across European countries," Banco de España Working Papers 0603, Banco de España. [Downloadable!]
  4. Matthew Brzozowski, 2005. "Does One Size Fit All? The CPI and Canadian Seniors," Social and Economic Dimensions of an Aging Population Research Papers 130, McMaster University. [Downloadable!]
  5. Shigenori Shiratsuka, 1999. "Measurement errors in Japanese Consumer Price Index," Working Paper Series WP-99-2, Federal Reserve Bank of Chicago. [Downloadable!]
  6. Eduardo Ley, 2001. "Whose Inflation? A Characterization of the CPI Plutocratic Gap," Public Economics 0110001, EconWPA, revised 20 Oct 2001. [Downloadable!]
    Other versions:
  7. R. A. Somerville, 2004. "Changes in Relative Consumer Prices and the Substitution Bias of the Laspeyres Price Index - Ireland, 1985-2001," The Economic and Social Review, Economic and Social Studies, vol. 35(1), pages 55-82. [Downloadable!]
  8. Christophe Muller, 2005. "The Measurement Of Poverty With Geographical And Intertemporal Price Dispersion. Evidence From Rwanda," Working Papers. Serie AD 2005-11, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
    Other versions:
  9. Boskin, Michael J, et al, 1998. "Consumer Prices, the Consumer Price Index, and the Cost of Living," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 3-26, Winter. [Downloadable!] (restricted)
  10. Goni, Edwin & Lopez, Humberto & Serven, Luis, 2006. "Getting realabout inequality : evidence from Brazil, Colombia, Mexico, and Peru," Policy Research Working Paper Series 3815, The World Bank. [Downloadable!]
  11. Francisco Javier Lasso Valderrama, 2008. "Impacto de los cambios de precios relativos en pobreza y desigualdad en Colombia: 1998-2007," BORRADORES DE ECONOMIA 004723, BANCO DE LA REPÚBLICA. [Downloadable!]
  12. Francisco Javier Lasso Valderrama, . "Impacto de los cambios de precios relativos en pobreza y desigualdad en Colombia: 1998-2007," Borradores de Economia 518, Banco de la Republica de Colombia. [Downloadable!]
  13. Javier Ruiz-Castillo & Eduardo Ley & Mario Izquierdo, . "Distributional aspects of the quality change bias in the CPI: Evidence from Spain," Studies on the Spanish Economy 73, FEDEA. [Downloadable!]
    Other versions:
  14. 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!]
  15. Morné Oosthuizen, 2007. "Consumer Price Inflation across the Income Distribution in South Africa," Working Papers 96105, University of Cape Town, Development Policy Research Unit. [Downloadable!]
  16. Alexandru Voicu & Michael L. Lahr, 2004. "Expenditure-based Interarea Cost of Living Index," Urban/Regional 0403006, EconWPA. [Downloadable!]
  17. Robert J Hill, 2004. "Inflation Measurement for Central Bankers," RBA Annual Conference Volume, in: Christopher Kent & Simon Guttmann (ed.), The Future of Inflation Targeting Reserve Bank of Australia. [Downloadable!]
  18. Christophe Muller, 2005. "The measurement of poverty with geographical and intertemporal price dispersion, Evidence from Rwanda," Working Papers DT/2005/16, DIAL (Développement, Institutions & Analyses de Long terme). [Downloadable!]
  19. Shiratsuka, Shigenori, 1999. "Measurement Errors in the Japanese Consumer Price Index," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 17(3), pages 69-102, December. [Downloadable!]
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