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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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    File URL: http://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/28466/dp17-2.pdf
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    References listed on IDEAS

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    4. Masashige Hamano, 2013. "On business cycles of variety and quality," DEM Discussion Paper Series 13-21, Department of Economics at the University of Luxembourg.
    5. Diewert W.Erwin & Lippe Peter von der, 2010. "Notes on Unit Value Index Bias," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 230(6), pages 690-708, December.
    6. Feenstra, Robert C, 1994. "New Product Varieties and the Measurement of International Prices," American Economic Review, American Economic Association, vol. 84(1), pages 157-177, March.
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    12. 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.
    13. 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.
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    Cited by:

    1. HARA Yasushi & TONOGI Akiyuki & TONOGI Konomi, 2020. "Impact of R&D Activities on Pricing Behaviors with Product Turnover," Discussion papers 20006, Research Institute of Economy, Trade and Industry (RIETI).

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    More about this item

    Keywords

    Price Index; Cost of Living Index; Unit Value Price; POS Data;
    All these keywords.

    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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