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Quantifying Quality Growth

  • Mark Bils
  • Peter J. Klenow

Using U.S. Consumer Expenditure Surveys, we estimate "quality Engel curves" for 66 durable goods based on the extent richer households pay more for each good. The same data show that the average price paid rises faster from 1980 to 1996 for goods with steeper quality Engel curves, as if households are ascending these curves. BLS prices likewise increase more quickly for goods with steeper quality Engel curves, suggesting the BLS does not fully net out the impact of quality upgrading. We estimate that annual quality growth averages 3.7 percent for our goods, with 2.2 percent showing up as higher inflation.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.91.4.1006
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 91 (2001)
Issue (Month): 4 (September)
Pages: 1006-1030

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Handle: RePEc:aea:aecrev:v:91:y:2001:i:4:p:1006-1030
Note: DOI: 10.1257/aer.91.4.1006
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  1. Manuel Trajtenberg, 1990. "Product Innovations, Price Indices and the (Mis)Measurement of Economic Performance," NBER Working Papers 3261, National Bureau of Economic Research, Inc.
  2. Griliches, Z. & Cockborn, I., 1993. "Generics and New Goods in Pharmaceutical Price Indexes," Harvard Institute of Economic Research Working Papers 1664, Harvard - Institute of Economic Research.
  3. Mark Bils & Peter J. Klenow, 1998. "Using Consumer Theory to Test Competing Business Cycle Models," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 233-261, April.
  4. Gordon, Robert J., 1990. "The Measurement of Durable Goods Prices," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226304557, July.
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  8. Goldberg, Pinelopi Koujianou, 1996. "Dealer Price Discrimination in New Car Purchases: Evidence from the Consumer Expenditure Survey," Journal of Political Economy, University of Chicago Press, vol. 104(3), pages 622-54, June.
  9. Brent R. Moulton & Karin E. Moses, 1997. "Addressing the Quality Change Issue in the Consumer Price Index," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 305-366.
  10. 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..
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