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Hedonic Prices Indexes for New Passenger Cars in Portugal (1997- 2001)

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Author Info

  • Hugo J. Reis

    (DEE/Banco de Portugal)

  • J.M.C. Santos Silva

    (ISEG, Universidade Técnica de Lisboa)

Abstract

This paper evaluates the effects of quality change on the price index for new passenger cars in Portugal for the years 1997-2001. Hedonic regression models are studied, giving particular emphasis to the relation between the form of the price index and the specification of the hedonic equation and estimation method used. It is argued that when log-linear hedonic functions are used the effects of quality change should be evaluated using a method akin to the Oaxaca decomposition (Oaxaca R., 1973, "Male-Female Wage Differentials in Urban Labor Markets", International Economic Review, 14, 693-709), rather than using the traditional dummy variables method. The results of the empirical part of the paper indicate that the CPI component corresponding to the sales of new passenger cars may have been overestimated by as much as 2.2 percentage points per year. This corresponds to an overestimation of the overall CPI by about 0.15 percentage points per year. As a by- product of this analysis it is also possible to conclude that the quality of new cars sold in Portugal increased on average 4.8 percent per year during this period.

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File URL: http://128.118.178.162/eps/em/papers/0303/0303003.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Econometrics with number 0303003.

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Length: 27 pages
Date of creation: 05 Mar 2003
Date of revision:
Handle: RePEc:wpa:wuwpem:0303003

Note: Type of Document - pdf; prepared on IBM PC; pages: 27
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Web page: http://128.118.178.162

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Keywords: CPI bias; Heteroskedasticity; Oaxaca decomposition.;

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References

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Citations

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Cited by:
  1. Sylvain M. Prado, 2009. "The European used-car market at a glance: Hedonic resale price valuation in automotive leasing industry," Economics Bulletin, AccessEcon, vol. 29(3), pages 2086-2099.
  2. Satoshi Nakano & Kazuhiko Nishimura, 2013. "Welfare gain from quality and price development in the Japan’s LCD TV market," Journal of Evolutionary Economics, Springer, vol. 23(4), pages 889-908, September.
  3. Esmeralda Ramalho & Joquim Ramalho, 2014. "Convenient links for the estimation of hedonic price indexes:the case of unique, infrequently traded assets," CEFAGE-UE Working Papers 2014_01, University of Evora, CEFAGE-UE (Portugal).
  4. Ikerne Valle Erkiaga & Kepa Ikazuriaga, 2013. "Assessing Changes in Capital and Investment as a Result of Fishing Capacity Limitation Programs," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 54(2), pages 223-260, February.
  5. Xosé-Luís Varela-Irimia, 2011. "Age effects, unobserved characteristics and hedonic price indexes: The Spanish car market in the 1990?s," Working Papers XREAP2011-11, Xarxa de Referència en Economia Aplicada (XREAP), revised Aug 2011.

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