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New Characteristics and Hedonic Price Index Numbers

Author

Listed:
  • Ian Crawford

    (University of Oxford)

  • J. Peter Neary

    (University of Oxford, CEPR, and CESifo)

Abstract

Changes in product characteristics on the extensive margin (the addition of new features and the removal of old ones) are an important and hitherto neglected dimension of quality change. Standard techniques for adjusting price indices for new goods cannot handle such changes satisfactorily, and this leads to an economically and statistically significant bias in the measurement of prices and real output. We combine insights from the theories of exact index numbers and demand for characteristics to develop a new method for incorporating changes on the extensive characteristic margin. Applied to U.K. data on new car sales, our method leads to revisions in estimated inflation rates for this commodity group that are both plausible and quantitatively important.

Suggested Citation

  • Ian Crawford & J. Peter Neary, 2023. "New Characteristics and Hedonic Price Index Numbers," The Review of Economics and Statistics, MIT Press, vol. 105(3), pages 665-682, May.
    • Handle: RePEc:tpr:restat:v:105:y:2023:i:3:p:665-682
    DOI: 10.1162/rest_a_01079
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    Cited by:

    1. Gabriel Ehrlich & John C. Haltiwanger & Ron S. Jarmin & David Johnson & Matthew D. Shapiro, 2020. "Reengineering Key National Economic Indicators," NBER Chapters, in: Big Data for Twenty-First-Century Economic Statistics, pages 25-68, National Bureau of Economic Research, Inc.
    2. David Atkin & Benjamin Faber & Thibault Fally & Marco Gonzalez-Navarro, 2024. "Measuring Welfare and Inequality with Incomplete Price Information," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 139(1), pages 419-475.
    3. Abe, Naohito & 阿部, 修人 & Rao, D.S.Prasada, 2020. "Generalized Logarithmic Index Numbers with Demand Shocks: Bridging the Gap between Theory and Practice," RCESR Discussion Paper Series DP20-1, Research Center for Economic and Social Risks, Institute of Economic Research, Hitotsubashi University.
    4. O'Donovan, Nick, 2024. "Turning less into more: Measuring real GDP growth in the green transition," Ecological Economics, Elsevier, vol. 224(C).
    5. Rodney P. Jones, 2021. "Were the hospital bed reductions proposed by English Clinical Commissioning Groups (CCGs) in the sustainability and transformation plans (STPs) achievable? Insights from a new model to compare interna," International Journal of Health Planning and Management, Wiley Blackwell, vol. 36(2), pages 459-481, March.
    6. Sands, Sean & Ferraro, Carla & Campbell, Colin & Kietzmann, Jan & Andonopoulos, Vasiliki Vicki, 2020. "Who shares? Profiling consumers in the sharing economy," Australasian marketing journal, Elsevier, vol. 28(3), pages 22-33.
    7. Mo Abdirahman & Diane Coyle & Richard Heys & Will Stewart, 2022. "Telecoms Deflators: A Story of Volume and Revenue Weights," Economie et Statistique / Economics and Statistics, Institut National de la Statistique et des Etudes Economiques (INSEE), issue 530-31, pages 43-59.

    More about this item

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles

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