Measuring the Growth from Better and Better Goods

49 Pages Posted: 9 Jul 2004 Last revised: 26 Jun 2010

See all articles by Mark Bils

Mark Bils

University of Rochester - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: July 2004

Abstract

Using micro CPI data, I show that much of inflation for durable goods since 1988 reflects, not increases in price for a given set of products, but rather shifts to a newer set of product models that display higher prices. I examine how these price differences should be divided between quality growth and price inflation based on how consumer spending responds to product substitutions. For all goods examined (cars, other vehicles, televisions, and other consumer electronics), buying shifts to the newer models despite their higher prices. This suggests that quality growth for durables has averaged at least 5.8% per year, more than double the rate implied by CPI measurement.

Suggested Citation

Bils, Mark, Measuring the Growth from Better and Better Goods (July 2004). NBER Working Paper No. w10606. Available at SSRN: https://ssrn.com/abstract=563050

Mark Bils (Contact Author)

University of Rochester - Department of Economics ( email )

Harkness Hall
Rochester, NY 14627-0158
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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