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Assessing The Quality Error In Output Measures: The Case Of Refrigerators

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  • Jack E. Triplett
  • Richard J. McDonald

Abstract

This paper computes new indexes of output for refrigerators, using hedonic methods to adjust for quality change. The hedonic technique is applied in a new way (it is used to make quality adjustments to prices before they are used in the index), and the results are compared with those from methods used in previous hedonic investigations. There are three major findings. (1) Overall (1960–1972), our hedonic deflated output series rise more rapidly than conventional measures, because the price indexes used for deflation rise more slowly. (2) The output measures fluctuate more than do output measures produced by conventional methods, because adding hedonic quality adjustments to WPI indexes moves them up in some years and down in others, and the resulting adjustments to the output series were positively correlated with changes in output. (3) Applying methods used in previous studies produces larger adjustments to the published indexes, suggesting that some of the differences noted in previous studies between hedonic indexes and official published indexes are related to computational methods, not to quality adjustment.

Suggested Citation

  • Jack E. Triplett & Richard J. McDonald, 1977. "Assessing The Quality Error In Output Measures: The Case Of Refrigerators," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 23(2), pages 137-156, June.
    • Handle: RePEc:bla:revinw:v:23:y:1977:i:2:p:137-156
    DOI: 10.1111/j.1475-4991.1977.tb00008.x
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    Cited by:

    1. Wynne, Mark A & Sigalla, Fiona D, 1996. "A Survey of Measurement Biases in Price Indexes," Journal of Economic Surveys, Wiley Blackwell, vol. 10(1), pages 55-89, March.
    2. W. Diewert, 2011. "Measuring productivity in the public sector: some conceptual problems," Journal of Productivity Analysis, Springer, vol. 36(2), pages 177-191, October.
    3. David Prentice & Xiangkang Yin, 2000. "Measuring Quality-Adjusted Inflation Rates for a Heterogeneous Oligopoly," Working Papers 2000.06, School of Economics, La Trobe University.
    4. John F. Early & James H. Sinclair, 1982. "Quality Adjustment in the Producer Price Indexes," NBER Chapters, in: The U.S. National Income and Product Accounts: Selected Topics, pages 107-146, National Bureau of Economic Research, Inc.
    5. Paul A. Armknecht & Daniel H. Ginsburg, 1992. "Improvements in Measuring Price Changes in Consumer Services: Past, Present, and Future," NBER Chapters, in: Output Measurement in the Service Sectors, pages 109-157, National Bureau of Economic Research, Inc.
    6. Ana M. Aizcorbe, 2003. "The stability of dummy variable price measures obtained from hedonic regressions," Finance and Economics Discussion Series 2003-05, Board of Governors of the Federal Reserve System (U.S.).
    7. Mick Silver, 2016. "How to Better Measure Hedonic Residential Property Price Indexes," IMF Working Papers 2016/213, International Monetary Fund.
    8. Chihiro Shimizu & Erwin Diewert, 2023. "Scanner Data, Product Churn and Quality Adjustment," Working Papers e185, Tokyo Center for Economic Research.
    9. David Wasshausen & Brent R. Moulton, 2006. "The Role of Hedonic Methods in Measuring Real GDP in the United States," BEA Papers 0067, Bureau of Economic Analysis.
    10. Mick Silver, 2009. "The Hedonic Country Product Dummy Method and Quality Adjustments for Purchasing Power Parity Calculations," IMF Working Papers 2009/271, International Monetary Fund.
    11. Diewert, Erwin, 2019. "Quality Adjustment and Hedonics: A Unified Approach," Microeconomics.ca working papers erwin_diewert-2019-2, Vancouver School of Economics, revised 14 Mar 2019.
    12. Nehring, Richard F. & Hallahan, Charlie & Fernandez-Cornejo, Jorge & Wang, Sun-Ling & Wechsler, Seth & Hart, Jarrett & Mosheim, Roberto, 2015. "Revisiting Quality-Adjusted Price and Quantity Indices for Pesticides," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205317, Agricultural and Applied Economics Association.
    13. Hoffmann, Johannes, 1998. "Problems of inflation measurement in Germany," Discussion Paper Series 1: Economic Studies 1998,01e, Deutsche Bundesbank.
    14. Ana M. Aizcorbe & Carol Corrado & Mark Doms, 2003. "When do matched-model and hedonic techniques yield similar measures?," Working Paper Series 2003-14, Federal Reserve Bank of San Francisco.
    15. Chiraz Karamti & Lukasz Grzybowski, 2010. "Hedonic study on mobile telephony market in France: pricing–quality strategies," Netnomics, Springer, vol. 11(3), pages 255-289, October.
    16. Diewert, Erwin, 2007. "Index Numbers," Economics working papers diewert-07-01-03-08-17-23, Vancouver School of Economics, revised 31 Jan 2007.
    17. Belma Öztürkkal & Aslı Togan-Eğrican, 2020. "Art investment: hedging or safe haven through financial crises," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 44(3), pages 481-529, September.

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