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Cellular Telephone, New Products, and the CPI

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  • Hausman, Jerry

Abstract

Since their introduction in 1983, cellular telephones' adoption has grown at 25 percent-35 percent per year. At year end 1997, about 55 million cellular telephones were in use in the United States. The Bureau of Labor Statistics (BLS) did not know that cellular telephones existed, at least in terms of calculating the Consumer Price Index (CPI), until 1998 when they were finally included in the CPI. Omitting cellular telephones from the CPI created a significant bias. The author estimates a bias in the BLS estimate of the telecommunications-services index of between .8 percent-1.9 percent per year because of the omission of the cellular telephone. Rather than telecommunications-service prices increasing at about 1.1 percent per year, the correct calculation has them decreasing at about .8 percent per year. Omission of new goods from the CPI, for significant periods of time, leads to important bias in the calculation of the CPI.

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Bibliographic Info

Article provided by American Statistical Association in its journal Journal of Business and Economic Statistics.

Volume (Year): 17 (1999)
Issue (Month): 2 (April)
Pages: 188-94

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Handle: RePEc:bes:jnlbes:v:17:y:1999:i:2:p:188-94

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  1. Hausman, Jerry A, 1981. "Exact Consumer's Surplus and Deadweight Loss," American Economic Review, American Economic Association, vol. 71(4), pages 662-76, September.
  2. Timothy F. Bresnahan & Robert J. Gordon, 1996. "The Economics of New Goods," NBER Books, National Bureau of Economic Research, Inc, number bres96-1, July.
  3. Pollak, Robert A., 1989. "The Theory of the Cost-of-Living Index," OUP Catalogue, Oxford University Press, number 9780195058703, September.
  4. Jerry A. Hausman, 1996. "Valuation of New Goods under Perfect and Imperfect Competition," NBER Chapters, in: The Economics of New Goods, pages 207-248 National Bureau of Economic Research, Inc.
  5. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
  6. Hausman, Jerry A & Newey, Whitney K, 1995. "Nonparametric Estimation of Exact Consumers Surplus and Deadweight Loss," Econometrica, Econometric Society, vol. 63(6), pages 1445-76, November.
  7. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November.
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