Measuring the Welfare Effect of Quality Change: Theory and Application of Japanese Autos
AbstractThe purpose of this paper is to identify conditions under which hedonic price indexes provide an exact measure of consumer welfare, so that the welfare effects of quality change can be inferred. Our results are quite positive in providing a rational for existing practices, though the conditions needed to justify these practices are somewhat restrictive. An application of our results is provided to the increase in characteristics of Japanese autos sold in the United States following the imposition of quotas in 1981. We argue that consumers did not value the additional characteristics at their former shadow-values, but rather, attached a lower value to the increase in characteristics. We compute the exact index that reflects this lower imputed value, and compare it to the conventional quality adjustment. The deadweight loss associated with the quality change is between one-quarter and one-third of the value of upgrading.
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 InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4401.
Date of creation: Jul 1993
Date of revision:
Note: ITI PR
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- W. Erwin Diewert, 1980. "Aggregation Problems in the Measurement of Capital," NBER Chapters, in: The Measurement of Capital, pages 433-538 National Bureau of Economic Research, Inc.
- Feenstra, Robert C, 1988. "Quality Change under Trade Restraints in Japanese Autos," The Quarterly Journal of Economics, MIT Press, vol. 103(1), pages 131-46, February.
- Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
- Kala Krishna, 1988. "Tariffs vs. Quotas with Endogenous Quality," NBER Working Papers 1535, National Bureau of Economic Research, Inc.
- Zvi Griliches, 1991.
"Hedonic Price Indexes and the Measurement of Capital and Productivity: Some Historical Reflections,"
in: Fifty Years of Economic Measurement: The Jubilee of the Conference on Research in Income and Wealth, pages 185-206
National Bureau of Economic Research, Inc.
- Zvi Griliches, 1988. "Hedonic Price Indexes and the Measurement of Capital and Productivity: Some Historical Reflections," NBER Working Papers 2634, National Bureau of Economic Research, Inc.
- Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
- Abel, Andrew B, 1983. "Market Structure and the Durability of Goods," Review of Economic Studies, Wiley Blackwell, vol. 50(4), pages 625-37, October.
- Swan, Peter L, 1970. "Durability of Consumption Goods," American Economic Review, American Economic Association, vol. 60(5), pages 884-94, December.
- A. Michael Spence, 1975. "Monopoly, Quality, and Regulation," Bell Journal of Economics, The RAND Corporation, vol. 6(2), pages 417-429, Autumn.
- Simon P. Anderson & Andre de Palma & Jacques-Francois Thisse, 1987. "Demand for Differentiated Products," Discussion Papers 726, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Diewert, W Erwin, 1978. "Superlative Index Numbers and Consistency in Aggregation," Econometrica, Econometric Society, vol. 46(4), pages 883-900, July.
- Carlos Alfredo Rodriguez, 1979. "The Quality of Imports and the Differential Welfare Effects of Tariffs, Quotas, and Quality Controls as Protective Devices," Canadian Journal of Economics, Canadian Economics Association, vol. 12(3), pages 439-49, August.
- Randi Boorstein & Robert C. Feenstra, 1987. "Quality Upgrading and its Welfare Cost in U.S. Steel Imports, 1969-74," NBER Working Papers 2452, National Bureau of Economic Research, Inc.
- Timothy F. Bresnahan & Dennis A. Yao, 1985. "The Nonpecuniary Costs of Automobile Emissions Standards," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 437-455, Winter,.
- Feenstra, R.C., 1995.
"Exact Hedonic Price Indexes,"
Department of Economics
95-11, California Davis - Department of Economics.
- Robert C. Feenstra, 1995.
"Estimating the Effects of Trade Policy,"
NBER Working Papers
5051, National Bureau of Economic Research, Inc.
- Robert Feenstra, 2004. "Estimating The Effects Of Trade Policy," Working Papers 9510, University of California, Davis, Department of Economics.
- Feenstra, R.C., 1995. "Estimating the Effects of Trade Policy," Papers 95-10, California Davis - Institute of Governmental Affairs.
- Feenstra, R.C., 1995. "Estimating the Effects of Trade Policy," Department of Economics 95-10, California Davis - Department of Economics.
- Herguera, Iñigo & Lutz, Stefan, . "Trade policy and leapfrogging," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/7214, Universidad Carlos III de Madrid.
- Lutz, Stefan H., 2002.
"The Effects of Quotas on Vertical Intra-Industry Trade,"
ZEW Discussion Papers
02-61, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Lutz, Stefan, 2002. "The effects of quotas on vertical intra-industry trade," ZEI Working Papers B 24-2002, ZEI - Center for European Integration Studies, University of Bonn.
- S Lutz, 2005. "Can a Tariff on Foreign Competition Harm the Domestic Industry?," The School of Economics Discussion Paper Series 0510, Economics, The University of Manchester.
- Stefan Lutz, 2005. "The Effect of Quotas on Domestic Product Price and Quality," International Advances in Economic Research, Springer, vol. 11(2), pages 163-173, May.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.