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Hedonic Prices Indexes for New Passenger Cars in Portugal (1997- 2001)

Hugo Reis () and João Santos Silva ()

Econometrics from University Library of Munich, Germany

Abstract: This paper evaluates the effects of quality change on the price index for new passenger cars in Portugal for the years 1997-2001. Hedonic regression models are studied, giving particular emphasis to the relation between the form of the price index and the specification of the hedonic equation and estimation method used. It is argued that when log-linear hedonic functions are used the effects of quality change should be evaluated using a method akin to the Oaxaca decomposition (Oaxaca R., 1973, "Male-Female Wage Differentials in Urban Labor Markets", International Economic Review, 14, 693-709), rather than using the traditional dummy variables method. The results of the empirical part of the paper indicate that the CPI component corresponding to the sales of new passenger cars may have been overestimated by as much as 2.2 percentage points per year. This corresponds to an overestimation of the overall CPI by about 0.15 percentage points per year. As a by- product of this analysis it is also possible to conclude that the quality of new cars sold in Portugal increased on average 4.8 percent per year during this period.

Keywords: CPI bias; Heteroskedasticity; Oaxaca decomposition. (search for similar items in EconPapers)
JEL-codes: C21 C43 E31 L62 (search for similar items in EconPapers)
Date: 2003-03-05
Note: Type of Document - pdf; prepared on IBM PC; pages: 27
References: View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed

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Related works:
Journal Article: Hedonic prices indexes for new passenger cars in Portugal (1997-2001) (2006) Downloads
Journal Article: Hedonic Price Indexes for New Passenger Cars in Portugal (1997-2001) (2002) Downloads
Working Paper: Hedonic Prices Indexes for New Passenger Cars in Portugal (1997-2001) (2002) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpem:0303003

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