An Application of the Oaxaca-Blinder Decomposition to the Price Deflation Problem

Ana Aizcorbe and Jan Haan

BEA Papers from Bureau of Economic Analysis

Abstract: We apply the Oaxaca-Blinder decomposition method used in the labor literature to split changes in average prices into inflation and quality components. The inflation measure is a full imputation Törnqvist price index. Using this index to deflate nominal spending properly allocates changes in the quality of goods to changes in real spending, not inflation.

JEL-codes: C43 E31 (search for similar items in EconPapers)
Date: 2024-06
New Economics Papers: this item is included in nep-mon
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