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Effects of the Entry and Exit of Products on Price Indexes

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  • Abe, Naohito
  • Inakura, Noriko
  • Tonogi, Akiyuki

Abstract

This study analyzes the effects of product turnover for price measurements. In addition to variety effects, we consider the effects of the price differentials between new and incumbent products. The decomposition of a unit value price index (UVPI) into price change effects, substitution effects, and turnover/new product effects reveals the magnitude and sources of differences between the UVPI and the Cost of Living Indexes with variety effects. Using a large-scale scanner data, we find that the product turnover effects that reflect the price gap between new and old goods are quantitatively important when constructing a general price level index.

Suggested Citation

  • Abe, Naohito & Inakura, Noriko & Tonogi, Akiyuki, 2017. "Effects of the Entry and Exit of Products on Price Indexes," RCESR Discussion Paper Series DP17-2, Research Center for Economic and Social Risks, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hit:rcesrs:dp17-2
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    References listed on IDEAS

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    6. Shioji, Etsuro, 2015. "Time varying pass-through: Will the yen depreciation help Japan hit the inflation target?," Journal of the Japanese and International Economies, Elsevier, vol. 37(C), pages 43-58.
    7. Masashige Hamano, 2013. "On business cycles of variety and quality," DEM Discussion Paper Series 13-21, Department of Economics at the University of Luxembourg.
    8. Robert C. Feenstra & Matthew D. Shapiro, 2003. "Introduction to "Scanner Data and Price Indexes"," NBER Chapters, in: Scanner Data and Price Indexes, pages 1-13, National Bureau of Economic Research, Inc.
    9. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2010. "Multiple-Product Firms and Product Switching," American Economic Review, American Economic Association, vol. 100(1), pages 70-97, March.
    10. Mick Silver, 2010. "The Wrongs And Rights Of Unit Value Indices," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 56(s1), pages 206-223, June.
    11. de Haan, Jan & van der Grient, Heymerik A., 2011. "Eliminating chain drift in price indexes based on scanner data," Journal of Econometrics, Elsevier, vol. 161(1), pages 36-46, March.
    12. Sato, Kazuo, 1976. "The Ideal Log-Change Index Number," The Review of Economics and Statistics, MIT Press, vol. 58(2), pages 223-228, May.
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    15. Daniel Melser & Iqbal A. Syed, 2013. "Prices over the Product Life Cycle: Implications for Quality-Adjustment and the Measurement of Inflation," Discussion Papers 2013-26, School of Economics, The University of New South Wales.
    16. Etsuro Shioji, 2015. "Time varying pass-through: Will the yen depreciation help Japan hit the inflation," Working Papers e092, Tokyo Center for Economic Research.
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    Cited by:

    1. Yasushi Hara & Akiyuki Tonogi & Konomi Tonogi, 2019. "Impact of R&D Activities on Pricing Behaviors with Product Turnover," Working Papers hal-02318466, HAL.
    2. Mei Dong & Toshiaki Shoji & Yuki Teranishi, 2021. "Product Cycles and Prices: a Search Foundation," Working Papers e161, Tokyo Center for Economic Research.
    3. Shiratsuka, Shigenori, 2021. "Lower-Level Substitution Bias in the Japanese Consumer Price Index: Evidence from Government Micro Data," Discussion Paper Series 722, Institute of Economic Research, Hitotsubashi University.
    4. Yasushi HARA & Akiyuki TONOGI & Konomi TONOGI, 2020. "Impact of R&D Activities on Pricing Behaviors with Product Turnover," Discussion papers 20006, Research Institute of Economy, Trade and Industry (RIETI).
    5. repec:upd:utmpwp:009 is not listed on IDEAS
    6. Jane Lankes & Mary K. Shenk & Mary C. Towner & Nurul Alam, 2022. "Dowry Inflation: Perception or Reality?," Population Research and Policy Review, Springer;Southern Demographic Association (SDA), vol. 41(4), pages 1641-1672, August.

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    Keywords

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    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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