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Rents Have Been Rising, Not Falling, in the Postwar Period

Author

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  • Theodore M. Crone

    (Swarthmore College)

  • Leonard I. Nakamura

    (Federal Reserve Bank of Philadelphia)

  • Richard Voith

    (Econsult Corporation)

Abstract

Until the end of 1977, the U.S. consumer price index (CPI) for rents tended to omit rent increases when units had a change of tenants or were vacant, biasing inflation estimates downward. Beginning in 1978, the Bureau of Labor Statistics (BLS) implemented a series of methodological changes that reduced this nonresponse bias, but substantial bias remained until 1985. We set up a model of nonresponse bias, parameterize it, and test it using BLS microdata. From 1940 to 1985, the official BLS CPI for urban wage earners and clerical workers (CPI-W) price index for tenant rents rose 3.6% annually; we argue that it should have risen 5.0% annually. © 2010 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Theodore M. Crone & Leonard I. Nakamura & Richard Voith, 2010. "Rents Have Been Rising, Not Falling, in the Postwar Period," The Review of Economics and Statistics, MIT Press, vol. 92(3), pages 628-642, August.
    • Handle: RePEc:tpr:restat:v:92:y:2010:i:3:p:628-642
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