IDEAS home Printed from https://ideas.repec.org/a/jns/jbstat/v230y2010i6p726-740.html
   My bibliography  Save this article

Lowe and Cobb-Douglas Consumer Price Indices and their Substitution Bias

Author

Listed:
  • Balk Bert M.

    (Rotterdam School of Management, Erasmus University, P. O. Box 17 38, 3000 DR Rotterdam, Netherlands, and Statistics Netherlands, The Hague)

Abstract

Catching the effect of substitution behaviour in a Consumer Price Index (CPI) as good as possible is a goal pursued by statistical agencies throughout the world. The difference between a CPI and a certain target cost-of-living index is called substitution bias. Balk and Diewert (2003) considered the substitution bias of a Lowe Consumer Price Index; see also CPI Manual (2004: Chapter 17). The present paper considers the substitution bias of a Cobb-Douglas (or Geometric Young) CPI, and compares the two price indices with respect to their substitution bias. It appears difficult to draw a clear-cut conclusion.

Suggested Citation

  • Balk Bert M., 2010. "Lowe and Cobb-Douglas Consumer Price Indices and their Substitution Bias," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 230(6), pages 726-740, December.
    • Handle: RePEc:jns:jbstat:v:230:y:2010:i:6:p:726-740
    DOI: 10.1515/jbnst-2010-0608
    as

    Download full text from publisher

    File URL: https://doi.org/10.1515/jbnst-2010-0608
    Download Restriction: no
    File URL: https://libkey.io/10.1515/jbnst-2010-0608?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Balk,Bert M., 2012. "Price and Quantity Index Numbers," Cambridge Books, Cambridge University Press, number 9781107404960, January.
    2. Diewert, W.E., 1993. "Duality approaches to microeconomic theory," Handbook of Mathematical Economics, in: K. J. Arrow & M.D. Intriligator (ed.), Handbook of Mathematical Economics, edition 4, volume 2, chapter 12, pages 535-599, Elsevier.
    3. Barnett, William A. & Serletis, Apostolos, 2008. "Consumer preferences and demand systems," Journal of Econometrics, Elsevier, vol. 147(2), pages 210-224, December.
    4. Diewert, Erwin, 2009. "Cost of Living Indexes and Exact Index Numbers," Economics working papers erwin_diewert-2009-6, Vancouver School of Economics, revised 13 Feb 2009.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Paul Armknecht & Mick Silver, 2014. "Post-Laspeyres: The Case for a New Formula for Compiling Consumer Price Indexes," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(2), pages 225-244, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Barnett, William A. & Erwin Diewert, W. & Zellner, Arnold, 2011. "Introduction to measurement with theory," Journal of Econometrics, Elsevier, vol. 161(1), pages 1-5, March.
    2. Barnett, William A. & Serletis, Apostolos, 2008. "Consumer preferences and demand systems," Journal of Econometrics, Elsevier, vol. 147(2), pages 210-224, December.
    3. Sun, Changyou, 2015. "An investigation of China's import demand for wood pulp and wastepaper," Forest Policy and Economics, Elsevier, vol. 61(C), pages 113-121.
    4. Hajargasht, Gholamreza & Rao, D.S. Prasada, 2019. "Multilateral index number systems for international price comparisons: Properties, existence and uniqueness," Journal of Mathematical Economics, Elsevier, vol. 83(C), pages 36-47.
    5. Diewert, W. Erwin & Fox, Kevin J., 2017. "Substitution Bias in Multilateral Methods for CPI Construction using Scanner Data," Microeconomics.ca working papers erwin_diewert-2017-3, Vancouver School of Economics, revised 23 Mar 2017.
    6. Barnett, William A. & Serletis, Apostolos, 2008. "The Differential Approach to Demand Analysis and the Rotterdam Model," MPRA Paper 12319, University Library of Munich, Germany.
    7. Inanoglu, Hulusi & Jacobs, Michael, Jr. & Liu, Junrong & Sickles, Robin, 2015. "Analyzing Bank Efficiency: Are "Too-Big-to-Fail" Banks Efficient?," Working Papers 15-016, Rice University, Department of Economics.
    8. Paris, Quirino & Caracciolo, Francesco, 2012. "Quantity Versus Shares in Estimating Demand Systems," Working Papers 124575, University of California, Davis, Department of Agricultural and Resource Economics.
    9. Growiec, Jakub, 2018. "Factor-specific technology choice," Journal of Mathematical Economics, Elsevier, vol. 77(C), pages 1-14.
    10. Van Puyenbroeck, Tom & Rogge, Nicky, 2017. "Geometric mean quantity index numbers with Benefit-of-the-Doubt weights," European Journal of Operational Research, Elsevier, vol. 256(3), pages 1004-1014.
    11. Balk, Bert M. & Rambaldi, Alicia N. & Rao, D. S. Prasada, 2022. "Macro-Economic Measures For A Globalized World: Global Growth And Inflation," Macroeconomic Dynamics, Cambridge University Press, vol. 26(2), pages 314-360, March.
    12. Hossain, A K M Nurul & Serletis, Apostolos, 2020. "Technical change in U.S. industries," Economic Modelling, Elsevier, vol. 91(C), pages 579-600.
    13. Hickman, William & Mortimer, Julie Holland, 2016. "Demand Estimation with Availability Variation," SocArXiv qe69j, Center for Open Science.
    14. Alekseev, Aleksandr & Sokolov, Mikhail V., 2021. "How to measure the average rate of change?," Mathematical Social Sciences, Elsevier, vol. 113(C), pages 43-59.
    15. Sara Amoroso & Peter M. Kort & Bertrand Melenberg & Joseph Plasmans & Mark Vancauteren, 2010. "Firm Level Productivity under Imperfect Competition in Output and Labor Markets," CESifo Working Paper Series 3082, CESifo.
    16. Fujioka Soichiro & Fukushige Mototsugu, 2019. "The Future of Demand for Food Away from Home and Prepared Food: Cohort and Age Effects in Japan," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 17(1), pages 1-17, May.
    17. Walden, John & Fissel, Ben & Squires, Dale & Vestergaard, Niels, 2015. "Productivity change in commercial fisheries: An introduction to the special issue," Marine Policy, Elsevier, vol. 62(C), pages 289-293.
    18. Fleissig, 2015. "Changes in aggregate food demand over the business cycle," Applied Economics Letters, Taylor & Francis Journals, vol. 22(17), pages 1366-1371, November.
    19. Pastor, Jesus T. & Lovell, C.A. Knox & Aparicio, Juan, 2020. "Defining a new graph inefficiency measure for the proportional directional distance function and introducing a new Malmquist productivity index," European Journal of Operational Research, Elsevier, vol. 281(1), pages 222-230.
    20. Carlo De Gregorio, 2012. "Sample size for the estimate of consumer price subindices with alternative statistical designs," Rivista di statistica ufficiale, ISTAT - Italian National Institute of Statistics - (Rome, ITALY), vol. 14(1), pages 19-47, October.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:jns:jbstat:v:230:y:2010:i:6:p:726-740. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.