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CPI Quality Adjustment and Productivity Growth: Railway Services in Japan
Author(s) -
Utsunomiya Kiyohito
Publication year - 2004
Publication title -
review of income and wealth
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.024
H-Index - 57
eISSN - 1475-4991
pISSN - 0034-6586
DOI - 10.1111/j.0034-6586.2004.00132.x
Subject(s) - gdp deflator , economics , productivity , total factor productivity , quality (philosophy) , econometrics , price index , macroeconomics , real gross domestic product , philosophy , epistemology
In recent years quality adjustment of price indices has been vigorously explored and the hedonic regression method has become popular in official statistics. In service sectors, however, the current CPI seems not to have been successfully adjusted to accommodate quality changes. In this paper I focus on the railway industry in Japan, where quality change is a vital factor in the measurement of price indices and productivity. Using hedonic regressions to adjust CPI railway fares, the paper suggests that there may be a significant degree of upward bias in the current CPI railway fares. Also, this leads to the results that the total factor productivity (TFP) of the Japanese railway industry, which is calculated by using the newly adjusted CPI as a deflator, has been improved contrary to previous research on this issue.