Apparel Prices 1914-93 and the Hulten/Bruegel Paradox
In: Price Index Concepts and Measurement
AbstractBackcasting upward bias in price index over long periods of time yields levels of real consumption two or four centuries ago that are implausibly low, raising the possibility that price index bias for important products may have been zero or even negative at some point in the past. This paper studies apparel prices over the long period 1914-93, developing new price indexes based on more than 16,000 data observations from the Sears catalog for that interval. The basic conclusion is that hedonic price indexes for womens' dresses exhibit a rate of increase of many orders of magnitude faster than either the Sears Matched-model index developed from the same source data or as compared to the CPI. The results provided here offer a complement to past research on computer prices, which also found that price changes were contemporaneous with model changes. Just as hedonic price indexes for computers almost always drop faster than matched-model indexes for computers, we have found the opposite relationship for apparel prices, although presumably for the same reason. The Sears matched-model indexes do not exhibit a consistent negative or positive drift relative to the CPI. For womens' apparel the drift is always negative but for mens' apparel there is a turnaround, from negative before 1965 to positive thereafter. Both the matched- model indexes and the CPI rise less rapidly for womens' apparel than for mens' apparel, which would be consistent with the hypothesis that price changes accompanying model changes (and thus linked out of both the Sears matched-model index and of the CPI but not in the hedonic index) are more frequent for womens' apparel, since models change more frequently.
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Other versions of this item:
- Robert J. Gordon, 2005. "Apparel Prices 1914-93 and the Hulten/Brueghel Paradox," NBER Working Papers 11548, National Bureau of Economic Research, Inc.
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- I31 - Health, Education, and Welfare - - Welfare and Poverty - - - General Welfare
- N32 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - U.S.; Canada: 1913-
- N62 - Economic History - - Manufacturing and Construction - - - U.S.; Canada: 1913-
- O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
- R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
- R - Urban, Rural, Regional, Real Estate, and Transportation Economics
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- Mark Doms & Ana Aizcorbe & Carol Corrado, 2003. "When do matched-model and hedonic techniques yield similar measures?," Working Paper Series 2003-14, Federal Reserve Bank of San Francisco.
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