Accounting for Housing in a CPI

Walter Erwin Diewert () and Alice O. Nakamura ()

UBC Departmental Archives from UBC Department of Economics

Abstract: Statistical agencies in different nations usually use the rental equivalence approach to the treatment of housing in their CPIs but a few countries use the user cost approach. The paper argues that an opportunity cost approach is the correct theoretical framework for accounting for OOH in a CPI. This approach, first mentioned in a 2006 OECD paper by Diewert, is developed more fully here. We explore the relationship of this new approach to the usual rental equivalency and user cost approaches. The new approach leads to an Owner Occupied Housing Opportunity Cost (OOHOC) index that is a weighted average of the rental and the financial opportunity costs.

Keywords: Durable goods; Consumer Price Index; Cost of Living Index; Owner Occupied Housing; depreciation; hedonic regression models; rental equivalence approac (search for similar items in EconPapers)
JEL-codes: C23 C43 C81 D12 E31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ure
Date: 2009-03-05, Revised 2009-03-12

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Related works:
Working Paper: Accounting for housing in a CPI (2009)
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Persistent link: http://EconPapers.repec.org/RePEc:ubc:bricol:erwin_diewert-2009-19

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