Bias Due to Input Source Substitutions: Can It Be Measured?

Walter Diewert and Alice Nakamura ()

Economics working papers from Vancouver School of Economics

Abstract: Once a business opts to purchase rather than produce an input, it can also change the source from which the product is procured. Producer price index programs face problems in dealing with price changes associated with sourcing changes. We present measures for price index bias due to sourcing substitutions. We begin with highly simplified cases to convey the rationale for our approach, and then show how the measures could be generalized. We also explain related aspects of the industry accounts. This material makes it clear that the growth of outsourcing and the related increases in domestic and foreign sourcing substitutions pose important challenges for statistics agencies.

Keywords: Offshoring; outsourcing; consumer price indexes; producer price indexes; intermediate input price indexes; bias in price indexes; Fisher index; total (search for similar items in EconPapers)
JEL-codes: C43 C67 C82 D24 D57 E31 F1 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2010-05-12, Revised 2010-07-13
References: Add references at CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:ubc:bricol:erwin_diewert-2010-15

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