Measuring the Growth from Better and Better Goods

Mark Bils

No 10606, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Using micro CPI data, I show that much of inflation for durable goods since 1988 reflects, not increases in price for a given set of products, but rather shifts to a newer set of product models that display higher prices. I examine how these price differences should be divided between quality growth and price inflation based on how consumer spending responds to product substitutions. For all goods examined (cars, other vehicles, televisions, and other consumer electronics), buying shifts to the newer models despite their higher prices. This suggests that quality growth for durables has averaged at least 5.8% per year, more than double the rate implied by CPI measurement.

JEL-codes: O4 (search for similar items in EconPapers)
Date: 2004-07
New Economics Papers: this item is included in nep-dev and nep-ino
Note: EFG
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Citations: View citations in EconPapers (30)

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