Auditing the Producer Price Index: Micro Evidence from Prescription Pharamceutical Preparations
From January 1984 through December 1989, the Bureau of Labor Statistics (BLS) price index for prescription pharmaceuticals grew at 9.09 percent per year. Using BLS-type Laspeyres index procedures with monthly price and quantity data on all prescription pharmaceuticals sold by four U.S. pharmaceutical manufacturers accounting for 24 percent of industry domestic sales, we find that the four-company index increases at 6.68 percent per year. When we employ a Divisia price index with smoothed weights incorporating new goods, the index grows 6.03 percent per year. Why does the BLS index grow 50 percent more rapidly than the Divisia index? That mystery is the focal point of our article.
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Volume (Year): 11 (1993)
Issue (Month): 3 (July)
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References listed on IDEAS
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.:
- Ernst R. Berndt & Zvi Griliches, 1990.
"Price Indexes for Microcomputers: An Exploratory Study,"
NBER Working Papers
3378, National Bureau of Economic Research, Inc.
- Ernst R. Berndt & Zvi Griliches, 1993. "Price Indexes for Microcomputers: An Exploratory Study," NBER Chapters, in: Price Measurements and Their Uses, pages 63-100 National Bureau of Economic Research, Inc.
- W. Erwin Diewert, 1988. "The Early History of Price Index Research," NBER Working Papers 2713, National Bureau of Economic Research, Inc.
- George J. Stigler & James K. Kindahl, 1970. "The Behavior of Industrial Prices," NBER Books, National Bureau of Economic Research, Inc, number stig70-1, Enero.
- Ernst R. Berndt & Zvi Griliches & Joshua G. Rosett, 1990. "On the Accuracy of Producer Price Indexes for Pharmaceutical Preparations: An Audit Based on Detailed Firm-Specific Data," NBER Working Papers 3490, National Bureau of Economic Research, Inc.
- Hulten, Charles R, 1973. "Divisia Index Numbers," Econometrica, Econometric Society, vol. 41(6), pages 1017-1025, November.
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