Lowe and Cobb-Douglas Consumer Price Indices and their Substitution Bias

Bert Balk

Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), 2010, vol. 230, issue 6, 726-740

Abstract: Catching the effect of substitution behaviour in a Consumer Price Index (CPI) as good as possible is a goal pursued by statistical agencies throughout the world. The difference between a CPI and a certain target cost-of-living index is called substitution bias. Balk and Diewert (2003) considered the substitution bias of a Lowe Consumer Price Index; see also CPI Manual (2004: Chapter 17). The present paper considers the substitution bias of a Cobb-Douglas (or Geometric Young) CPI, and compares the two price indices with respect to their substitution bias. It appears difficult to draw a clear-cut conclusion.

Keywords: Index number; cost-of-living index; Lowe index; Cobb-Douglas index; Geometric Young index; Index number; cost-of-living index; Lowe index; Cobb-Douglas index; Geometric Young index (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:jns:jbstat:v:230:y:2010:i:6:p:726-740

DOI: 10.1515/jbnst-2010-0608

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