The stability of dummy variable price measures obtained from hedonic regressions
Although the stability of coefficients from hedonic regressions has received much attention recently, that of dummy variable (DV) price indexes obtained from these regressions has not. In principle, one problem translates into the other only when some prices are not observed in the data. Numerically, however, DV measures obtained from a "typical" specification can be quite unstable even when the number of missing prices is small. To the extent that collinearity is an important source of the problem, functional forms that use (orthogonal) fixed effects to control for quality differences across goods should yield more stable estimates. Data for Intel's microprocessors are used to illustrate these points.
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"Exact Hedonic Price Indexes,"
Department of Economics
95-11, California Davis - Department of Economics.
- Ariel Pakes, 2002.
"A Reconsideration of Hedonic Price Indices with an Application to PC's,"
NBER Working Papers
8715, National Bureau of Economic Research, Inc.
- Ariel Pakes, 2003. "A Reconsideration of Hedonic Price Indexes with an Application to PC's," American Economic Review, American Economic Association, vol. 93(5), pages 1578-1596, December.
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