Understating Rising Quality Means Import Price Inflation Is Overstated

Danial Lashkari
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Danial Lashkari: https://www.newyorkfed.org/research/economists/Lashkari

No 20260114, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: It is common for price measures to consider changes in quality. That is, a price index might fall even though listed prices are unchanged because the quality of the item has improved. An adjustment for quality captures the fact that consumers are effectively getting more for the same dollar when product quality rises. In practice, however, it is notoriously difficult to measure quality changes since it requires access to detailed data on all product characteristics that matter to consumers. We offer a novel method to infer quality changes and apply it to U.S. import price indices. When we account for quality improvements in this way, we find that the import price inflation based on official measures has been overstated, revealing that consumers have been getting more from their purchases of imported goods than what standard quality adjustments suggest.

Keywords: imports; inflation; quality upgrading (search for similar items in EconPapers)
JEL-codes: C43 D11 D12 E01 E1 L11 L15 (search for similar items in EconPapers)
Date: 2026-01-14
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DOI: 10.59576/lse.20260114

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