Measurement of the Cost-of-Living Index in the Easi Model: Evidence from the Japanese Expenditure Data

Manami Ogura

Asian Journal of Economic Modelling, 2016, vol. 4, issue 1, 28-46

Abstract: In this study, I measure the change in the cost-of-living index in Japan over approximately 20 years using newly developed demand system model. I find that the cost-of-living index, itself, was shifted upward by price changes, despite the existence of a protracted deflation in Japan. This implies an increase in consumer surplus along with changes in consumer expenditures, prices, and demographics. Further, I find that the substitution effect in the cost-of-living index is so large that the increase in consumer surplus depends on it. That is, consumers substitute greatly for cross-price goods in the face of price changes.

Keywords: Demand system; Exact affine stone index model; Cost-of-living index; Substitution effect; Unobserved heterogeneity; Household expenditure. (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:asi:ajemod:v:4:y:2016:i:1:p:28-46:id:843

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