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Does Quality Adjustment Matter for Technologically Stable Products? An Application to the CPI for Food


  • John S. Greenlees
  • Robert McClelland


Most indexes in the Consumer Price Index (CPI) use a form of the "matched-model" approach. It is frequently assumed that this approach accurately reflects inflation for items that have no major trend in quality. In this paper we investigate that hypothesis using CPI data for retail food items. We find that CPI analysts may be correct on average when they decide that new and replacement items are similar in quality. We also find, however, that when sample items are replaced by items of significantly different quality the CPI imputation procedures may underestimate price change and overstate quality change.

Suggested Citation

  • John S. Greenlees & Robert McClelland, 2011. "Does Quality Adjustment Matter for Technologically Stable Products? An Application to the CPI for Food," American Economic Review, American Economic Association, vol. 101(3), pages 200-205, May.
  • Handle: RePEc:aea:aecrev:v:101:y:2011:i:3:p:200-205

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    References listed on IDEAS

    1. Beaulieu Nancy & Cutler David M & Ho Katherine & Isham George & Lindquist Tammie & Nelson Andrew & O'Connor Patrick, 2006. "The Business Case for Diabetes Disease Management for Managed Care Organizations," Forum for Health Economics & Policy, De Gruyter, vol. 9(1), pages 1-38, December.
    2. David M. Cutler & Mark McClellan & Joseph P. Newhouse & Dahlia Remler, 1998. "Are Medical Prices Declining? Evidence from Heart Attack Treatments," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 991-1024.
    3. Viscusi, W Kip & Aldy, Joseph E, 2003. "The Value of a Statistical Life: A Critical Review of Market Estimates throughout the World," Journal of Risk and Uncertainty, Springer, vol. 27(1), pages 5-76, August.
    4. Claudio Lucarelli & Sean Nicholson, 2009. "A Quality-Adjusted Price Index for Colorectal Cancer Drugs," NBER Working Papers 15174, National Bureau of Economic Research, Inc.
    5. repec:reg:rpubli:282 is not listed on IDEAS
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    Cited by:

    1. Arlan Brucal & Michael Roberts, 2016. "Do Energy Efficiency Standards Hurt Consumers? Evidence from Household Appliance Sales," Working Papers 201625, University of Hawaii at Manoa, Department of Economics.
    2. Etienne Gagnon & Benjamin R. Mandel & Robert J. Vigfusson, 2014. "Missing Import Price Changes and Low Exchange Rate Pass-Through," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(2), pages 156-206, April.

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