IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Auditing the Producer Price Index: Micro Evidence From Prescription Pharmaceutical Preparations

Listed author(s):
  • Ernst R. Berndt
  • Zvi Griliches
  • Joshua G. Rosett
Registered author(s):

In this paper we focus on a mystery we uncovered while undertaking a detailed audit of the US Bureau of Labor Statistics producer price index (PPl). We summarize our puzzle as follows. From January 1984 through December 1989.the BLS price Index for SIC 28341 (prescription pharmaceutical preparations) grew at an annual rate of 9.09%. For purposes of comparison, we have obtained monthly price and quantity sales data on all prescription pharmaceutical preparation products sold by four major US pharmaceutical manufacturers, accounting for about 24% of total industry domestic sales in 1989. Using Laspeyres price index construction procedures on these data that mimic BLS methods, we find that over the same time period. the four-company price index increased at only 6.68% per year. Finally. when we employ a Divisia price index procedure with smoothed weights that incorporates new goods immediately, the aggregate price index for these four firms grows at a rate of only 6.03% per year. Why is it that the official BLS price index grows approximately 50% more rapidly (9.09% vs. 6.03%)than the Divisia price index? That mystery is the focal point of our paper.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4009.

in new window

Date of creation: Mar 1992
Publication status: published as Journal of Business and Economic Statistics, vol. 11 no. 3, July 1993, pp. 251-264
Handle: RePEc:nbr:nberwo:4009
Note: PR
Contact details of provider: Postal:
National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.

Phone: 617-868-3900
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

in new window

  1. 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.
  2. 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.
  3. Hulten, Charles R, 1973. "Divisia Index Numbers," Econometrica, Econometric Society, vol. 41(6), pages 1017-1025, November.
  4. George J. Stigler & James K. Kindahl, 1970. "The Behavior of Industrial Prices," NBER Books, National Bureau of Economic Research, Inc, number stig70-1, December.
  5. 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)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:4009. 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: ()

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.