Bias in U.S. Import Prices and Demand
AbstractThe purpose of the paper is to measure the potential bias in the U.S. import price index due to the appearance of new product varieties, or new foreign suppliers, and determine the effect of this bias on the estimated income elasticity of import demand. Existing import price indexes are based on a sample of products from importing firms. We argue that if the share of import expenditure on the sampled products is falling over time, this will lead to an upward bias in the measured index. Using a correction based on the falling expenditure share on sampled countries, we find that the income elasticity of aggregate U.S. import demand is reduced from 2.5 to 1.7, or about halfway to unity. Our estimates suggest that the aggregate import price index is upward biased by about one and one-half percentage points annually.
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 4841.
Date of creation: Aug 1994
Date of revision:
Publication status: published as Robert C. Feenstra, Clinton R. Shiells. "Bias in U.S. Import Prices and Demand," in Timothy F. Bresnahan and Robert J. Gordon, editors, "The Economics of New Goods" University of Chicago Press (1997)
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
Other versions of this item:
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
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.:
- Paul Krugman, 1989.
"Differences In Income Elasticities and Trends in Real Exchange Rates,"
NBER Working Papers
2761, National Bureau of Economic Research, Inc.
- Krugman, Paul, 1989. "Differences in income elasticities and trends in real exchange rates," European Economic Review, Elsevier, vol. 33(5), pages 1031-1046, May.
- Feenstra, Robert C, 1994. "New Product Varieties and the Measurement of International Prices," American Economic Review, American Economic Association, vol. 84(1), pages 157-77, March.
- Peter Hooper, 1989. "Exchange rates and U.S. external adjustment in the short run and the long run," International Finance Discussion Papers 346, Board of Governors of the Federal Reserve System (U.S.).
- Sato, Kazuo, 1976. "The Ideal Log-Change Index Number," The Review of Economics and Statistics, MIT Press, vol. 58(2), pages 223-28, May.
- Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
- Kichun Kang, 2012. "Is the "Houthakker-Magee" Finding Durable? Evidence from Disaggregated Trade Flows between China and Korea," Annals of Economics and Finance, Society for AEF, vol. 13(2), pages 299-316, November.
- Naoko Shinkai, 2000. "¿Explica el teorema Stopler-Samuelson el desplazamiento de los salarios? El vínculo entre el comercio internacional y los salarios en países latinoamericanos," Research Department Publications 4238, Inter-American Development Bank, Research Department.
- Bruce A. Blonigen, 1999.
"In Search of Substitution Between Foreign Production and Exports,"
NBER Working Papers
7154, National Bureau of Economic Research, Inc.
- Blonigen, Bruce A., 2001. "In search of substitution between foreign production and exports," Journal of International Economics, Elsevier, vol. 53(1), pages 81-104, February.
- Lukas Mohler, 2012. "Variety Gains and the Extensive Margin of Trade," Working papers 2012/16, Faculty of Business and Economics - University of Basel.
- Robert C. Feenstra, 1996. "U.S. Imports, 1972-1994: Data and Concordances," NBER Working Papers 5515, National Bureau of Economic Research, Inc.
- Richards, Timothy J. & Patterson, Paul M., 1998.
"Dynamic Complementarity In Export Promotion: The Market Access Program In Fruits And Vegetables,"
Journal of Agricultural and Resource Economics,
Western Agricultural Economics Association, vol. 23(02), December.
- Richards, Timothy J. & Patterson, Paul M., 1998. "Dynamic Complementarity In Export Promotion: The Market Access Program In Fruits And Vegetables," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20851, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Naoko Shinkai, 2000. "Does the Stopler-Samuelson Theorem Explain the Movement in Wages? The Linkage Between Trade and Wages in Latin American Countries," Research Department Publications 4237, Inter-American Development Bank, Research Department.
- Catherine L. Mann, 2002. "Perspectives on the U.S. Current Account Deficit and Sustainability," Journal of Economic Perspectives, American Economic Association, vol. 16(3), pages 131-152, Summer.
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.