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The Econometric Foundations of Hedonic Elementary Price Indices

Hans Wolfgang Brachinger and Michael Beer

No 12, DQE Working Papers from Department of Quantitative Economics, University of Freiburg/Fribourg Switzerland

Abstract: Hedonic methods are currently considered state-of-the-art for handling quality changes when compiling consumer price indices. The present article proposes first a mathematical description of characteristics and of elementary aggregates. In a following step, a hedonic econometric model is formulated and hedonic elementary population indices are defined. These indices extend from simple indices based on some average quality to universal formulae that incorporate the full quality spectrum of the respective elementary aggregate. We emphasise that population indices are unobservable economic parameters that need to be estimated by suitable sample indices. It is shown that most of the hedonic elementary index formulae used in practice are sample versions of particular hedonic elementary population indices.

Keywords: Consumer price index; hedonic regression; elementary aggregate; hedonic econometric model; hedonic elementary price index (search for similar items in EconPapers)
JEL-codes: C43 E31 (search for similar items in EconPapers)
Date: 2009-04-24
Note: Room document at the 11th Ottawa Group meeting (Neuchâtel 2009)
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