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The Consumer Price Index: Conceptual Issues and Practical Suggestions

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  • Charles L. Schultze

Abstract

A National Academy of Sciences Panel recently made a number of recommendations to the BLS for improving the Consumer Price Index, while also suggesting some cautions to be observed when considering the adoption of new concepts and techniques. This paper discusses the Panel's analyses in four areas: Should a cost-of-living index be the measurement objective of the CPI? Should the index attempt to capture the effect on living costs from changes in "environmental" conditions? How can hedonic techniques be best applied for measuring quality changes? Should the BLS attempt to measure the consumer surpluses accompanying the introduction of new goods?

Suggested Citation

  • Charles L. Schultze, 2003. "The Consumer Price Index: Conceptual Issues and Practical Suggestions," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 3-22, Winter.
    • Handle: RePEc:aea:jecper:v:17:y:2003:i:1:p:3-22
    Note: DOI: 10.1257/089533003321164921
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    References listed on IDEAS

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    1. Timothy F. Bresnahan & Robert J. Gordon, 1996. "The Economics of New Goods," NBER Books, National Bureau of Economic Research, Inc, number bres96-1, March.
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    4. Lieu, Pang-Tien & Liang, Jung-Hui & Chen, Jui-Hui, 2008. "Consumer preferences and cost of living in Taiwan," Journal of Asian Economics, Elsevier, vol. 19(3), pages 224-235, June.
    5. Svedberg, Peter & Tilton, John E., 2006. "The real, real price of nonrenewable resources: copper 1870-2000," World Development, Elsevier, vol. 34(3), pages 501-519, March.
    6. Basak, Suleyman & Pavlova, Anna, 2004. "Monopoly Power and the Firm€ٳ Valuation:," Working papers 4234-01, Massachusetts Institute of Technology (MIT), Sloan School of Management.
    7. Ingvild Almås & Tim Beatty & Thomas Crossley, 2018. "Lost in translation: What do Engel curves tell us about the cost of living?," IFS Working Papers W18/04, Institute for Fiscal Studies.
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    9. Reis, Hugo J. & Santos Silva, J.M.C., 2006. "Hedonic prices indexes for new passenger cars in Portugal (1997-2001)," Economic Modelling, Elsevier, vol. 23(6), pages 890-908, December.
    10. Tilton, John E., 2013. "The terms of trade debate and the policy implications for primary product producers," Resources Policy, Elsevier, vol. 38(2), pages 196-203.
    11. Richard S. J. Tol, 2016. "Population and trends in the global mean temperature," Papers 1612.09123, arXiv.org.
    12. Gaddis,Isis, 2016. "Prices for poverty analysis in Africa," Policy Research Working Paper Series 7652, The World Bank.
    13. 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.
    14. Harry J. Holzer & Paul Offner & Elaine Sorensen, 2005. "Declining employment among young black less-educated men: The role of incarceration and child support," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 24(2), pages 329-350.
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    16. Panzone, Luca A. & Wossink, Ada & Southerton, Dale, 2013. "The design of an environmental index of sustainable food consumption: A pilot study using supermarket data," Ecological Economics, Elsevier, vol. 94(C), pages 44-55.
    17. Steve Dowrick, 2004. "Income-based Measures of Average Well-being," WIDER Working Paper Series RP2004-24, World Institute for Development Economic Research (UNU-WIDER).
    18. Fredrik Andersson & Harry J. Holzer & Julia Lane, 2009. "Temporary Help Agencies and the Advancement Prospects of Low Earners," NBER Chapters, in: Studies of Labor Market Intermediation, pages 373-398, National Bureau of Economic Research, Inc.
    19. Rachel Griffith & Ephraim Leibtag & Andrew Leicester & Aviv Nevo, 2009. "Consumer Shopping Behavior: How Much Do Consumers Save?," Journal of Economic Perspectives, American Economic Association, vol. 23(2), pages 99-120, Spring.
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    22. Marshall Reinsdorf & Jack E. Triplett, 2009. "A Review of Reviews: Ninety Years of Professional Thinking About the Consumer Price Index," NBER Chapters, in: Price Index Concepts and Measurement, pages 17-83, National Bureau of Economic Research, Inc.
    23. Dreger Christian & Kosfeld Reinhold, 2010. "Do Regional Price Levels Converge?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 230(3), pages 274-286, June.

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