Estimating Upward Bias in the Japanese CPI Using Engel's Law

Kazuhito Higa

Global COE Hi-Stat Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: The Japanese Consumer Price Index (CPI) is considered to be upwardly biased. This paper estimates the Engel curve based on National Survey of Family Income and Expenditure data to measure the bias. The estimated annual bias for the period 1989 to 2004 is 0.5 percentage points. Correcting the bias leads to a lower inflation rate of 0.14 percent per year, against the official inflation rate of 0.65 percent during the period. A demographic analysis shows that a household with a pre-school child faces a smaller bias suggesting that the opportunity cost of shopping determines the size of the bias.

Keywords: Consumer Price Index Bias; Engel's Law (search for similar items in EconPapers)
JEL-codes: C10 D12 E30 (search for similar items in EconPapers)
Date: 2013-04
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Persistent link: https://EconPapers.repec.org/RePEc:hst:ghsdps:gd12-295

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