At what price? : conceptualizing and measuring cost-of-living and price indexes / Panel on Conceptual, Measurement, and Other Statistical Issues in Developing Cost-of-Living Indexes ; Charles L. Schultze and Christopher Mackie, editors.

Format:

Book

Author/Creator:

National Research Council Staff, Corporate Author.

Contributor:

Schultze, Charles L.

Mackie, Christopher D.

National Research Council (U.S.). Panel on Conceptual, Measurement, and Other Statistical Issues in Developing Cost-of-Living Indexes.

Language:

English

Subjects (All):

Consumer price indexes--United States.

Consumer price indexes.

Cost and standard of living--United States--Statistical methods.

Cost and standard of living.

Prices--United States--Statistical methods.

Prices.

Economic indicators--United States.

Economic indicators.

Index numbers (Economics).

Physical Description:

xiii, 332 p.

Edition:

1st ed.

Other Title:

Cost-of-living and price indexes

Place of Publication:

Washington, DC : National Academy Press, c2002.

Language Note:

English

Summary:

How well does the consumer price index (CPI) reflect the changes that people actually face in living costs "from apples to computers to health care? Given how it is used, is it desirable to construct the CPI as a cost-of-living index (COLI)? With what level of accuracy is it possible to construct a single index that represents changes in the living costs of the nation (TM)s diverse population? At What Price? examines the foundations for consumer price indexes, comparing the conceptual and practical strengths, weaknesses, and limitations of traditional oefixed basket and COLI approaches. The book delves into a range of complex issues, from how to deal with the changing quality of goods and services, including difficult-to-define medical services, to how to weight the expenditure patterns of different consumers. It sorts through the key attributes and underlying assumptions that define each index type in order to answer the question: Should a COLI framework be used in constructing the U.S. CPI? In answering this question, the book makes recommendations as to how the Bureau of Labor Statistics can continue to improve the accuracy and relevance of the CPI. With conclusions that could affect the amount of your next pay raise, At What Price? is important to everyone, and a must-read for policy makers, researchers, and employers.

Contents:

Machine generated contents note: EXECUTIVE SUMMARY

A COGI Versus a COLI, 2

The Scope or Domain of the Index, 3

Aggregation, 4

Accounting for Substitution Behavior, 5

Quality Change, 6

New Goods, 7

Outlets, 8

Pricing Medical Care, 9

Index Design and Index Purpose, 10

Data Collection, 11

1 INTRODUCTION

Background, 13

Panel Charge and Report Organization, 17

Alternative Approaches: A COGI Versus a COLI, 18

Domain of the CPI, 19

Substitution, 21

Aggregation, 26

Changes in the Quality of Goods, 27

New Goods, 30

Outlet Substitution, 32

Stocks and Flows, 33

Index Purpose and Design, 35

Data Collection, 36

2 CONCEPTUAL FOUNDATIONS FOR PRICE AND

COST-OF-LIVING INDEXES 38

Setting the Stage: What Are Price Indexes?, 41

The Theory of Price Indexes and Its Critics, 43

Two Perspectives, 57

Conclusions, 73

Technical Note: A Mathematical Approach to Price Indexes, 74

3 INDEX DOMAIN 94

An Unconditional COLI: Conceptual Issues, 96

Measurement Problems, 98

Supplemental Indexes and Satellite Accounts, 101

Other Domain Issues, 102

Conclusion and Recommendation, 105

4 EVOLVING MARKET BASKETS: ADJUSTING INDEXES

TO ACCOUNT FOR QUALITY CHANGE 106

COLI and COGI Views of the Quality Change Problem, 109

Evidence from the Boskin Commission Report, 112

BLS Approaches to Quality Changes, 114

Hedonic Regression Methods, 122

Cautions and Recommendations, 140

Technical Note 1: Boskin Commission Estimates of

Quality Change and New Goods Bias, 146

Technical Note 2: Mathematical Description of Hedonic Methods, 149

5 NEW GOODS AND NEW OUTLETS 155

New Goods, 155

New Outlets, 167

6 THE SPECIAL CASE OF MEDICAL SERVICES 178

Background, 178

Conceptual and Measurement Issues, 181

The Domain of Consumer Health Expenditures:

Employers' Health Insurance Payments, 185

Direct Pricing of Health Insurance, 186

Recommendations, 188

7 INDEX DESIGN AND INDEX PURPOSE 191

Indexing Public Transfer Payments, 192

Wage Bargains and Indexed Wages, 207

Indexing Private Contracts, 208

Inflation-Indexed Treasury Securities, 210

Indexing the Federal Income Tax System, 212

Measuring Output Changes, 214

Inflation Indicators for Macroeconomic Policy, 216

Technical Note: The CPI Versus the NIPA Price Index

as an Inflation Measure, 219

8 WHOSE INDEX? AGGREGATING ACROSS HOUSEHOLDS 222

Two Kinds of Heterogeneity, 223

Heterogeneity in Prices Paid and in Rates of Inflation, 225

The Consequences of Heterogeneity for Index Construction, 226

Group Indexes: Why the Current Data Collection System

Cannot Produce Them, 226

A Price Index for the Elderly?, 228

The Conceptual Basis for Group Indexes, 229

How Might Data for Subgroup Indexes Be Assembled and

What Would It Cost?, 232

Suggested Research and Testing, 235

Plutocratic Versus Democratic Weights, 237

Summary and Recommendation, 240

Technical Note 1: Aggregation and the "Representative Consumer," 241

Technical Note 2: Do Inflation Rates Differ by Age

or Income Group?, 246

9 DATA COLLECTION FOR CPI CONSTRUCTION 252

The Current Data Collection Process, 253

Alternative Data Collection Approaches, 264

Summary and Recommendations, 274

Technical Note: Additional Description of CPI Data Inputs, 276

APPENDIX: STATISTICAL DEFINITION AND

ESTIMATION OF PRICE INDEXES 283

REFERENCES 293

GLOSSARY 307

BIOGRAPHICAL SKETCHES OF PANEL MEMBERS AND STAFF 315

INDEX 319.

Notes:

"Committee on National Statistics, Division of Behavioral and Social Sciences and Education."

Includes bibliographical references (p. 292-305) and index.

ISBN:

9786610184699

9780309170796

0309170796

9781280184697

1280184698

9780309512176

0309512174

OCLC:

923255159