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Effects of the Entry and Exit of Products on Price Indexes

Naohito Abe, Noriko Inakura and Akiyuki Tonogi

No DP17-2, RCESR Discussion Paper Series from Research Center for Economic and Social Risks, Institute of Economic Research, Hitotsubashi University

Abstract: This study analyzes the effects of product turnover for price measurements. In addition to variety effects, we consider the effects of the price differentials between new and incumbent products. The decomposition of a unit value price index (UVPI) into price change effects, substitution effects, and turnover/new product effects reveals the magnitude and sources of differences between the UVPI and the Cost of Living Indexes with variety effects. Using a large-scale scanner data, we find that the product turnover effects that reflect the price gap between new and old goods are quantitatively important when constructing a general price level index.

Keywords: Price Index; Cost of Living Index; Unit Value Price; POS Data (search for similar items in EconPapers)
JEL-codes: C43 D12 E31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2017-03
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