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Durable goods, price indexes and quality change: an application to automobile prices in Italy, 1988-1998

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  • Gian Maria Tomat

    ()
    (Bank of Italy, Main Rome Branch, Economic Research Unit)

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    Abstract

    The paper analyzes the problems of measurement of durable consumer prices posed by quality change. Theoretical price indexes are defined and used to analyze several empirical methods of estimation of quality adjusted price indexes. The paper shows that hedonic regressions and other quality adjustment methods commonly used by statistical agencies do not always provide reliable price estimators. The analysis suggests that the application of methods of measurement based on chain indexes may remove the measurement problems associated with quality change. The paper includes an application of the theory to the analysis of automobile prices in Italy during the period 1988-1998.

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    File URL: http://www.bancaditalia.it/pubblicazioni/econo/temidi/td02/td439_02/td439/tema_439_02.pdf
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    Bibliographic Info

    Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 439.

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    Date of creation: Mar 2002
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    Handle: RePEc:bdi:wptemi:td_439_02

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    Postal: Via Nazionale, 91 - 00184 Roma
    Web page: http://www.bancaditalia.it
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    Related research

    Keywords: durable goods; quality change; hedonic regressions; elementary index numbers;

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    References

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    1. Diewert, W E, 1974. "Intertemporal Consumer Theory and the Demand for Durables," Econometrica, Econometric Society, vol. 42(3), pages 497-516, May.
    2. W. Erwin Diewert, 1995. "Axiomatic and Economic Approaches to Elementary Price Indexes," NBER Working Papers 5104, National Bureau of Economic Research, Inc.
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    Cited by:
    1. Xosé-Luís Varela-Irimia, 2011. "Age effects, unobserved characteristics and hedonic price indexes: The Spanish car market in the 1990?s," Working Papers XREAP2011-11, Xarxa de Referència en Economia Aplicada (XREAP), revised Aug 2011.
    2. Négyesi, Áron, 2003. "Hogyan mérjük az új gazdaságot?. A termékminőség változásának számbavétele árindexek segítségével
      [How can the new economy be measured?. Estimating change in product quality with th
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(11), pages 988-1001.
    3. Campos, Nauro F & Leite Barbosa, Renata, 2008. "Paintings and Numbers: An Econometric Investigation of Sales Rates, Prices and Returns in Latin American Art Auctions," IZA Discussion Papers 3445, Institute for the Study of Labor (IZA).

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