Consumers' Opinion of Inflation Bias Due to Quality Improvements
Measurement of quality changes has proven to be an especially difficult aspect of calculating unbiased rates of inflation. We propose a new methodology of capturing quality improvements based on consumer focus groups and apply this methodology in an environment where quality changes might be expected to be especially rapid and extensive, a post-communist transition economy. We find that the methodology indicates a substantial understatement of quality improvements during transition, and, therefore, a substantial overstatement of inflation resulting in a serious downward bias in growth rate estimates for post-communist economies. The move to free markets has apparently improved consumers= welfare more by improving what they can purchase than by increasing how much they can purchase. Overall, mismeasurement of quality changes may have understated Czech growth rates during the first decade after communism by as much as 5 percentage points per year.
|Date of creation:||01 May 2004|
|Date of revision:|
|Contact details of provider:|| Postal: 724 E. University Ave, Wyly Hall 1st Flr, Ann Arbor MI 48109|
Phone: 734 763-5020
Fax: 734 763-5850
Web page: http://www.wdi.umich.edu
More information through EDIRC
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.:
- Mitchell, Robert Cameron & Carson, Richard T, 1986. "Property Rights, Protest, and the Siting of Hazardous Waste Facilities," American Economic Review, American Economic Association, vol. 76(2), pages 285-90, May.
- Feenstra, R.C., 1995.
"Exact Hedonic Price Indexes,"
95-11, California Davis - Institute of Governmental Affairs.
- Shogren, Jason F. & Shin, Seung Youll & Hayes, Dermot J. & Kliebenstein, James, 1994.
"Resolving Differences in Willingness to Pay and Willingness to Accept,"
Staff General Research Papers Archive
701, Iowa State University, Department of Economics.
- Shogren, Jason F. & Seung Y. Shin & Dermot J. Hayes & James B. Kliebenstein, 1994. "Resolving Differences in Willingness to Pay and Willingness to Accept," American Economic Review, American Economic Association, vol. 84(1), pages 255-70, March.
- Filer, Randall K. & Hanousek, Jan, 2002.
"Survey-Based Estimates of Biases in Consumer Price Indices during Transition: Evidence from Romania,"
Journal of Comparative Economics,
Elsevier, vol. 30(3), pages 476-487, September.
- Jan Hanousek & Randall K. Filer, 2001. "Survey-based Estimates of Biases in Consumer Price Indices During Transition: Evidence from Romania," CERGE-EI Working Papers wp178, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
- Kontogianni, Areti & Skourtos, Mihalis S. & Langford, Ian H. & Bateman, Ian J. & Georgiou, Stavros, 2001. "Integrating stakeholder analysis in non-market valuation of environmental assets," Ecological Economics, Elsevier, vol. 37(1), pages 123-138, April.
- Nick Hanley & Gary Koop & Begoña Álvarez-Farizo & Robert E. Wright & Ceara Nevin, 2001. "Go climb a mountain: an application of recreation demand modelling to rock climbing in Scotland," Journal of Agricultural Economics, Wiley Blackwell, vol. 52(1), pages 36-52.
- Mark Bils & Peter J. Klenow, 2000.
"Quantifying Quality Growth,"
NBER Working Papers
7695, National Bureau of Economic Research, Inc.
- Paul A. Armknecht & Fenella Maitland-Smith, 1999. "Price Imputation and Other Techniques for Dealing with Missing Observations, Seasonality and Quality Change in Price Indices," IMF Working Papers 99/78, International Monetary Fund.
- Kolstad, Charles D. & Guzman, Rolando M., 1999. "Information and the Divergence between Willingness to Accept and Willingness to Pay," Journal of Environmental Economics and Management, Elsevier, vol. 38(1), pages 66-80, July.
- William D. Nordhaus, 1998. "Quality Change in Price Indexes," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 59-68, Winter.
- Wiktor L. Adamowicz & Vinay Bhardwaj & Bruce Macnab, 1993. "Experiments on the Difference between Willingness to Pay and Willingness to Accept," Land Economics, University of Wisconsin Press, vol. 69(4), pages 416-427.
- Kaplowitz, Michael D. & Hoehn, John P., 2001. "Do focus groups and individual interviews reveal the same information for natural resource valuation?," Ecological Economics, Elsevier, vol. 36(2), pages 237-247, February.
- David E. Lebow & Jeremy B. Rudd, 2003. "Measurement Error in the Consumer Price Index: Where Do We Stand?," Journal of Economic Literature, American Economic Association, vol. 41(1), pages 159-201, March.
- Michael J. Boskin, 1998. "Consumer Prices, the Consumer Price Index, and the Cost of Living," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 3-26, Winter.
- Charles R. Hulten, 1997. "Quality change in the CPI," Review, Federal Reserve Bank of St. Louis, issue May, pages 87-100.
When requesting a correction, please mention this item's handle: RePEc:wdi:papers:2004-681. 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: (Laurie Gendron)
If references are entirely missing, you can add them using this form.