Consumers' Opinion of Inflation Bias Due to Quality Improvements
AbstractMeasurement of quality changes has proven to be an especially difficult aspect of calculating unbiased rates of inflation. We propose a new methodology of capturing quality improvements based on consumer focus groups and apply this methodology in an environment where quality changes might be expected to be especially rapid and extensive, a post-communist transition economy. We find that the methodology is practical and that it indicates a substantial understatement of quality improvements during transition, and, therefore, a substantial overstatement of inflation resulting in a serious downward bias in growth rate estimates for post-communist economies. The move to free markets has apparently improved consumers' welfare more by improving what they can purchase than by increasing how much they can purchase.
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Bibliographic InfoPaper provided by Hunter College Department of Economics in its series Economics Working Paper Archive at Hunter College with number 02/8.
Length: 30 pp
Date of creation: 2002
Date of revision:
Inflation Bias; Quality Change; Transition Economies;
Other versions of this item:
- Hanousek, Jan & Filer, Randall K, 2004. "Consumers' Opinion of Inflation Bias Due to Quality Improvements," Economic Development and Cultural Change, University of Chicago Press, vol. 53(1), pages 235-54, October.
- Jan Hanousek & Randall K. Filer, 2004. "Consumers' Opinion of Inflation Bias Due to Quality Improvements," William Davidson Institute Working Papers Series 2004-681, William Davidson Institute at the University of Michigan.
- C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- P24 - Economic Systems - - Socialist Systems and Transition Economies - - - National Income, Product, and Expenditure; Money; Inflation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-11-18 (All new papers)
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