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Consumers' Opinion of Inflation Bias Due to Quality Improvements in Transition in the Czech Republic

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Author Info

  • Jan Hanousek

    (CERGE-EI)

  • Randall K. Filer

    (City University of New York; CERGE-EI)

Abstract

Substantial understatement of the degree of quality improvement during transition, and, therefore, a substantial overstatement of inflation rates has resulted in a serious downward bias in estimates of the rate of growth of 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. Examining 63 products, focus group respondents in the Czech Republic reported that if they were to purchase the 1990 quality product today they would only be willing to do so at a average of 54 per cent of the current price for the current quality product. This implies that the actual increase in prices for the decade for these products 66 per cent instead of the official 139 per cent. Overall, mismeasurement of quality changes may have understated Czech growth rates during the first decade after communism by as much as 5 percentage point per year.

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File URL: http://128.118.178.162/eps/dev/papers/0110/0110009.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Development and Comp Systems with number 0110009.

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Length: 24 pages
Date of creation: 28 Oct 2001
Date of revision:
Handle: RePEc:wpa:wuwpdc:0110009

Note: Type of Document - Acrobat PDF; pages: 24 ; figures: included
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Web page: http://128.118.178.162

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Keywords: Inflation Bias; Quality Change; Transition Economies;

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References

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Citations

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Cited by:
  1. Jan Hanousek & Randall K. Filer, 2001. "Evaluating Imperfections and Biases in Price Indexes during Transition," CERGE-EI Working Papers wp186, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  2. Jan Babecky & Fabrizio Coricelli & Roman Horvath, 2008. "Assessing Inflation Persistence: Micro Evidence on an Inflation Targeting Economy," CERGE-EI Working Papers wp353, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  3. Randall K. Filer & Jan Hanousek, 2002. "Data Watch: Research Data from Transition Economies," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 225-240, Winter.
  4. Balázs Égert, & László Halpern & Ronald MacDonald, 2005. "Equilibrium Exchange Rates in Transition Economies: Taking Stock of the Issues," William Davidson Institute Working Papers Series wp793, William Davidson Institute at the University of Michigan.
  5. Égert, Balázs, 2004. "Assessing equilibrium exchange rates in CEE acceding countries: Can we have DEER with BEER without FEER? A critical survey of the literature," BOFIT Discussion Papers 1/2004, Bank of Finland, Institute for Economies in Transition.
  6. Jan Hanousek & Randall K. Filer, 2003. "Substitution Biases in Price Indexes during Transition," Development and Comp Systems 0306002, EconWPA.
  7. Randall K. Filer & Jan Hanousek, 2003. "Inflationary Bias in Mid to Late Transition Czech Republic," Development and Comp Systems 0306001, EconWPA.
  8. Kovács, Ilona, 2003. "A fogyasztói árindex torzító tényezői
    [Distorting factors in the consumer price index]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 702-719.
  9. Irena Szarowská, 2008. "Financing Of Public Services Through Public Private Partnership Projects," JOURNAL STUDIA UNIVERSITATIS BABES-BOLYAI NEGOTIA, Babes-Bolyai University, Faculty of Business.
  10. Olimpia State & Gabriela Tigu & Claudia - Elena Tuclea, 2008. "Etude De Marché Sur La Culture Des Organisations De L’Industrie Touristique," JOURNAL STUDIA UNIVERSITATIS BABES-BOLYAI NEGOTIA, Babes-Bolyai University, Faculty of Business.

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