Measuring the Growth from Better and Better Goods
AbstractUsing micro CPI data, I show that much of inflation for durable goods since 1988 reflects, not increases in price for a given set of products, but rather shifts to a newer set of product models that display higher prices. I examine how these price differences should be divided between quality growth and price inflation based on how consumer spending responds to product substitutions. For all goods examined (cars, other vehicles, televisions, and other consumer electronics), buying shifts to the newer models despite their higher prices. This suggests that quality growth for durables has averaged at least 5.8% per year, more than double the rate implied by CPI measurement.
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Date of creation: Jul 2004
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Find related papers by JEL classification:
- O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-07-04 (All new papers)
- NEP-DEV-2004-07-04 (Development)
- NEP-INO-2004-07-04 (Innovation)
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