Do Higher Prices for New Goods Reflect Quality Growth or Inflation?
AbstractMuch of Consumer Price Index (CPI) inflation for consumer durables reflects shifts to newer product models that display higher prices, not price increases for a given set of goods. I examine how these higher prices for new models should be divided between quality growth and price inflation based on (a) whether consumer purchases shift toward or away from the new models and (b) whether new-model price increases generate higher relative prices that persist through the model cycle. I conclude that two-thirds of the price increases with new models should be treated as quality growth. This implies that CPI inflation for durables has been overstated by almost 2 percentage points per year, with quality growth understated by the same magnitude. (c) 2009 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology..
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by MIT Press in its journal Quarterly Journal of Economics.
Volume (Year): 124 (2009)
Issue (Month): 2 (May)
Contact details of provider:
Web page: http://mitpress.mit.edu/journals/
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Ana Aizcorbe & Benjamin Bridgman & Jeremy Nalewaik, 2009.
"Heterogeneous car buyers: a stylized fact,"
Finance and Economics Discussion Series
2009-12, Board of Governors of the Federal Reserve System (U.S.).
- Oleksiy Kryvtsov, 2013. "Is There a Quality Bias in the Canadian CPI? Evidence from Micro Data," Working Papers 13-24, Bank of Canada.
- Alcalá Francisco, 2009.
"Time, Quality and Growth,"
201052, Fundacion BBVA / BBVA Foundation.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Karie Kirkpatrick).
If references are entirely missing, you can add them using this form.