New Characteristics and Hedonic Price Index Numbers

Ian Crawford and J. Peter Neary

The Review of Economics and Statistics, 2023, vol. 105, issue 3, 665-682

Abstract: Changes in product characteristics on the extensive margin (the addition of new features and the removal of old ones) are an important and hitherto neglected dimension of quality change. Standard techniques for adjusting price indices for new goods cannot handle such changes satisfactorily, and this leads to an economically and statistically significant bias in the measurement of prices and real output. We combine insights from the theories of exact index numbers and demand for characteristics to develop a new method for incorporating changes on the extensive characteristic margin. Applied to U.K. data on new car sales, our method leads to revisions in estimated inflation rates for this commodity group that are both plausible and quantitatively important.

Date: 2023
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https://doi.org/10.1162/rest_a_01079
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Related works:
Working Paper: New characteristics and hedonic price index numbers (2019)
Working Paper: New Characteristics and Hedonic Price Index Numbers (2019)
Working Paper: New Characteristics and Hedonic Price Index Numbers (2019)
Working Paper: New Characteristics and Hedonic Price Index Numbers (2019)
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