Preference changes and index number theory

Thu Huyen Le and Kam Yu

Journal of Economic Surveys, 2025, vol. 39, issue 4, 1361-1394

Abstract: The economic approach to the cost of living index assumes that consumer preferences remain constant over time. This assumption poses little risk in calculating a short‐run intertemporal bilateral price index. The assumption, however, breaks down in the case of a fixed‐based time series index spanning a long period and in the context of international comparison. The economic analysis of preference changes, however, is not well‐established. In this paper, we review the economic approach in index numbers under preference changes. Suggestions are made on how to approach the problem and their implications for the measurement of price and quantity indices.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:bla:jecsur:v:39:y:2025:i:4:p:1361-1394

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