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Quality-Adjusted Prices for the American Automobile Industry: 1906-1940

In: The Economics of New Goods

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  • Daniel M. G. Raff
  • Manuel Trajtenberg

Abstract

We push the span of hedonic price calculations for automobiles backwards towards the industry's birth. Most of the real change that occurred between 1906 and 1982 occurred between 1906 and 1940. During these years, hedonic prices fell at an average annual rate of 5%. The pace was brisker still during the first 8-12 years. Our measured declines can be decomposed into price and quality components. Our calculations suggest that 60% of the overall decline 1906-1940 was due to process innovation and only 40% to product innovation or quality change per se. Regressors representing mechanical systems matter in these calculations.
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Suggested Citation

  • Daniel M. G. Raff & Manuel Trajtenberg, 1996. "Quality-Adjusted Prices for the American Automobile Industry: 1906-1940," NBER Chapters,in: The Economics of New Goods, pages 71-108 National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:6065
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    References listed on IDEAS

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    1. repec:ucp:bknber:9780226304557 is not listed on IDEAS
    2. Makoto Ohta & Zvi Griliches, 1976. "Automobile Prices Revisited: Extensions of the Hedonic Hypothesis," NBER Chapters,in: Household Production and Consumption, pages 325-398 National Bureau of Economic Research, Inc.
    3. Bresnahan, T.F. & Raff, D.M.G., 1993. "Technological Heterogeneity, Adjustment Costs, and the Dynamics of Plant Shutdown Behavior: The American Motor Vehicule Industry in the Time of the Great Depression," Papers 93-09, Columbia - Graduate School of Business.
    4. 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.
    5. Raff, Daniel M. G., 1991. "Making Cars and Making Money in the Interwar Automobile Industry: Economies of Scale and Scope and the Manufacturing behind the Marketing," Business History Review, Cambridge University Press, vol. 65(04), pages 721-753, December.
    6. Triplett, Jack E, 1969. "Automobiles and Hedonic Quality Measurement," Journal of Political Economy, University of Chicago Press, vol. 77(3), pages 408-417, May/June.
    7. Pakes, Ariel & Berry, Steven & Levinsohn, James A, 1993. "Applications and Limitations of Some Recent Advances in Empirical Industrial Organization: Price Indexes and the Analysis of Environmental Change," American Economic Review, American Economic Association, vol. 83(2), pages 241-246, May.
    8. 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..
    9. Robert J. Gordon, 1990. "The Measurement of Durable Goods Prices," NBER Books, National Bureau of Economic Research, Inc, number gord90-1, April.
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    Cited by:

    1. Bongers, Anelí & Torres, José L., 2014. "Technological change in U.S. jet fighter aircraft," Research Policy, Elsevier, vol. 43(9), pages 1570-1581.
    2. Ramana Nanda & William R. Kerr, 2015. "Financing Innovation," Annual Review of Financial Economics, Annual Reviews, vol. 7(1), pages 445-462, December.
    3. Wesley Nimon & John Beghin, 1999. "Are Eco-Labels Valuable? Evidence From the Apparel Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(4), pages 801-811.
    4. Edquist, Harald, 2005. "Do hedonic price indexes change history? The case of electrification," SSE/EFI Working Paper Series in Economics and Finance 586, Stockholm School of Economics, revised 29 Apr 2005.
    5. Axhausen, K.W. & Froelich, P. & Tschopp, M., 2011. "Changes in Swiss accessibility since 1850," Research in Transportation Economics, Elsevier, vol. 31(1), pages 72-80.
    6. Eriksen, Michael D. & Kniesner, Thomas J. & Rohlfs, Chris & Sullivan, Ryan, 2016. "Toward more general hedonic estimation: Clarifying the roles of alternative experimental designs with an application to a housing attribute," Regional Science and Urban Economics, Elsevier, vol. 57(C), pages 54-62.
    7. Renato Fonseca, 2015. "Quality Change in Brazilian Automobiles," Discussion Papers 0066, Instituto de Pesquisa Econômica Aplicada - IPEA.
    8. Fonseca, Renato, 1999. "The Brazilian Automobile Industry In the 1980's: the Lost Decade?," Revista Brasileira de Economia - RBE, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 53(1), January.

    More about this item

    JEL classification:

    • N6 - Economic History - - Manufacturing and Construction
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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