Template-type: ReDIF-Paper 1.0
Author-Name: Ian Crawford
Author-Workplace-Name: Nuffield College, University of Oxford
Author-Email: ian.crawford@nuffield.ox.ac.uk
Author-Name: J. Peter Neary
Author-Workplace-Name: University of Oxford, CEPR and CESifo
Author-Email: peter.neary@​economics.ox.ac.uk
Title: New Characteristics and Hedonic Price Index Numbers
Abstract: Changes in product characteristics on the extensive margin are an important and hitherto neglected dimension of quality change. Standard techniques for qualityadjusting price indices cannot handle such changes satisfactorily, which leads to an
economically and statistically significant bias in the measurement of prices and real output. We combine insights from the theories of 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. 
Classification-JEL: C90, C91, C92, D03
Keywords: Extensive and Intensive Margins of Consumption; Characteristics Model; Quality Change; Characteristics Sato-Vartia-Feenstra Index Number.
Length: 36 pages
Creation-Date: 2019-08-12
Number: 2019-W02
File-URL: https://www.nuffield.ox.ac.uk/economics/Papers/2019/2019W02_Crawford_Neary_20190812_Nuffield_Discussion_Paper_Series.pdf
File-Format: application/pdf
Handle: RePEc:nuf:econwp:1902