Quality Change in Price Indexes

William Nordhaus

Journal of Economic Perspectives, 1998, vol. 12, issue 1, 59-68

Abstract: Price indexes provide the fundamental building blocks for measuring the general price level along with real incomes and real output. But the most important single price index for the United States, the CPI, has been criticized as significantly underestimating the pace of quality change. This paper sketches the issues involved in the measurement of quality change in price indexes. It reviews the theory of quality change, discusses how the Bureau of Labor Statistics deals with quality change, and provides examples of measurement issues in practice. It concludes with a proposal to resolve the massive uncertainties in this area.

JEL-codes: C43 E31 (search for similar items in EconPapers)
Date: 1998
Note: DOI: 10.1257/jep.12.1.59
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Citations: View citations in EconPapers (47)

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