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Is there a quality bias in the Canadian CPI? Evidence from microdata
Author(s) -
Kryvtsov Oleksiy
Publication year - 2016
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/caje.12238
Subject(s) - microdata (statistics) , economics , inflation (cosmology) , consumer price index (south africa) , price index , wholesale price index , econometrics , quality (philosophy) , relative price , producer price index , monetary economics , durable good , price level , macroeconomics , monetary policy , mid price , population , physics , census , philosophy , demography , epistemology , sociology , theoretical physics
Rising consumer prices may reflect shifts by consumers to new higher‐priced products, mostly for durable and semi‐durable goods. I apply Bils’ (2009) methodology to newly available Canadian consumer price data for non‐shelter goods and services to estimate how price increases can be divided between quality growth and price inflation. I find that less than one third of observed price increases during model changeovers should be attributed to quality growth. This implies overall price inflation close to inflation measured by the official index. I conclude that, according to Bils’ methodology, the quality bias is not an important source of potential mismeasurement of CPI inflation in Canada.