IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/3490.html
   My bibliography  Save this paper

On the Accuracy of Producer Price Indexes for Pharmaceutical Preparations: An Audit Based on Detailed Firm-Specific Data

Author

Listed:
  • Ernst R. Berndt
  • Zvi Griliches
  • Joshua G. Rosett

Abstract

This paper reports preliminary results of a detailed audit of one component of the Producer Price Index (PPI), using data from a large muiltproduct company. We compare price indexes constructed in a variety of ways from the universe of products of a large pharmaceutical manufacturer in the US, with price indexes constructed from the particular products of this firm sampled by the BIS, using BIS and alternative index number procedures. A principal finding is that price indexes based on the BIB sample of this firm grew similarly to the published PPI's for SIC 28341, but in contrast, price indexes computed using the universe of products manufactured by the firm grew much more slowly. Although some variations emerge depending on how one undertakes the calculations, our typical finding is that, employing monthly data from January 1984 through December 1989, the BIB sample price index rises at nearly the same rate as the PPI, bet at roughly twice the rate of indexes based on the universe of products shipped by this pharmaceutical firm. We also report results of a preliminary attempt to uncover the source of this disparity, we provide some evidence on the "new goods" problem, and we implement a procedure to mitigate the problem of "drift" associated with the Tornqvist approximation to the Divisia chained index.

Suggested Citation

  • Ernst R. Berndt & Zvi Griliches & Joshua G. Rosett, 1990. "On the Accuracy of Producer Price Indexes for Pharmaceutical Preparations: An Audit Based on Detailed Firm-Specific Data," NBER Working Papers 3490, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:3490
    Note: PR
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w3490.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Diewert, Erwin, 2007. "Index Numbers," Economics working papers diewert-07-01-03-08-17-23, Vancouver School of Economics, revised 31 Jan 2007.
    2. Hulten, Charles R, 1973. "Divisia Index Numbers," Econometrica, Econometric Society, vol. 41(6), pages 1017-1025, November.
    3. W. Erwin Diewert, 1988. "The Early History of Price Index Research," NBER Working Papers 2713, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Berndt, Ernst R & Griliches, Zvi & Rosett, Joshua G, 1993. "Auditing the Producer Price Index: Micro Evidence from Prescription Pharamceutical Preparations," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(3), pages 251-264, July.
    2. Richard G. Frank & David S. Salkever, 1991. "Pricing, Patent Loss and the Market For Pharmaceuticals," NBER Working Papers 3803, National Bureau of Economic Research, Inc.
    3. Judith K. Hellerstein, 1994. "The Demand for Post-Patent Prescription Pharmaceuticals," NBER Working Papers 4981, National Bureau of Economic Research, Inc.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:3490. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: () or (Joanne Lustig). General contact details of provider: http://edirc.repec.org/data/nberrus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.