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- 1. An Application of the Hedonic Approach to Clothing Items in the Consumer Price Index (CPI) ArchivedArticles and reports: 62F0014M1997009Geography: CanadaDescription:
A research program was recently initiated by Prices Division to explore the feasibility of using the hedonic approach for making quality adjustments in the Consumer Price Index (CPI) for clothing items. The current paper is the first of a series, which attempts to derive hedonic quality adjustments for Men's Dress Shirts. A database for quality characteristics is first constructed, from which two experimental hedonic models are estimated. One of these models is then used to produce hedonic quality adjustments for all shirt substitutions that have occurred subsequent to May 1995 up to June 1996. These values are then compared with the actual quality adjustments used in the official CPI. Although results are preliminary, three important conclusions can be made. First, quality adjustments derived using the hedonic versus the traditional approach are very different, at least at the level of individual substitutions. Which of the two approaches is more accurate, however, is not evident at this premature stage. Second, the integrity of the data on quality characteristics will have to improve greatly if the hedonic approach is ever to be considered as a viable alternative. Finally, improving the source data on quality characteristics would be of value whether or not the hedonic approach is adopted for making quality adjustments. One of the ways this could be done would be to adopt the checklist approach, which is the current procedure in the United States and in Sweden.
Release date: 1999-05-13 - Articles and reports: 62F0014M1998011Geography: CanadaDescription:
This paper is the second in a series reporting on the current progress of a study whose purpose is to explore the feasibility of using the hedonic approach for making quality adjustments to the Clothing component of the Consumer Price Index (CPI). In this phase of the study, two preliminary checklists were developed for obtaining prices and quality characteristics for Men's Dress Shirts and Men's Sports Jackets. These checklists were then used for data collection in the field on expanded CPI samples for the two items. To date, the resulting database for Men's Dress Shirts has been used to derive a hedonic model. The main conclusions that can be made at this point are: 1) checklists represent a certain improvement over the current method of reporting and should be developed for all clothing items in the CPI; 2) if the hedonic approach to quality adjustment in clothing is to be formally adopted then the CPI samples will have to be augmented, at least periodically to permit estimation; and 3) more experience is needed with the hedonic approach in research mode, using clothing items with more complexity, before we can say whether the hedonic approach should be formally adopted as an alternative to our current method of quality adjustment for clothing items.
Release date: 1999-05-13 - Articles and reports: 62F0014M1998012Geography: CanadaDescription:
This paper examines the methods of adjustment for quality change made in the Canadian Consumer Price Index for the period 1989 to 1994. It finds that in most cases the current Canadian practice ensures that the replacement of one commodity by another, one variety of a commodity by another, or one outlet by another, has no impact on the overall index. The main exceptions to this result occur when replacing varieties of commodities that are purchased only occasionally, and a judgement is made that the quality ratio between the old and new variety is not the same as the ratio of their prices. In these cases there is an impact on the index, up or down, depending on whether the change in price reported is higher or lower than the change in quality. From the experience of the CPI in these six years there has been a correlation between the price ratio of a variety and its replacement and the index movement that derives from the judgement. The direction and size of the impact on the index depends largely on whether an item is replaced with a higher or lower priced item. For these reasons, the paper argues that more attention should be paid to ensuring that the item selection is more representative of current sales than has traditionally been the case.
Release date: 1999-05-13
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- 1. An Application of the Hedonic Approach to Clothing Items in the Consumer Price Index (CPI) ArchivedArticles and reports: 62F0014M1997009Geography: CanadaDescription:
A research program was recently initiated by Prices Division to explore the feasibility of using the hedonic approach for making quality adjustments in the Consumer Price Index (CPI) for clothing items. The current paper is the first of a series, which attempts to derive hedonic quality adjustments for Men's Dress Shirts. A database for quality characteristics is first constructed, from which two experimental hedonic models are estimated. One of these models is then used to produce hedonic quality adjustments for all shirt substitutions that have occurred subsequent to May 1995 up to June 1996. These values are then compared with the actual quality adjustments used in the official CPI. Although results are preliminary, three important conclusions can be made. First, quality adjustments derived using the hedonic versus the traditional approach are very different, at least at the level of individual substitutions. Which of the two approaches is more accurate, however, is not evident at this premature stage. Second, the integrity of the data on quality characteristics will have to improve greatly if the hedonic approach is ever to be considered as a viable alternative. Finally, improving the source data on quality characteristics would be of value whether or not the hedonic approach is adopted for making quality adjustments. One of the ways this could be done would be to adopt the checklist approach, which is the current procedure in the United States and in Sweden.
Release date: 1999-05-13 - Articles and reports: 62F0014M1998011Geography: CanadaDescription:
This paper is the second in a series reporting on the current progress of a study whose purpose is to explore the feasibility of using the hedonic approach for making quality adjustments to the Clothing component of the Consumer Price Index (CPI). In this phase of the study, two preliminary checklists were developed for obtaining prices and quality characteristics for Men's Dress Shirts and Men's Sports Jackets. These checklists were then used for data collection in the field on expanded CPI samples for the two items. To date, the resulting database for Men's Dress Shirts has been used to derive a hedonic model. The main conclusions that can be made at this point are: 1) checklists represent a certain improvement over the current method of reporting and should be developed for all clothing items in the CPI; 2) if the hedonic approach to quality adjustment in clothing is to be formally adopted then the CPI samples will have to be augmented, at least periodically to permit estimation; and 3) more experience is needed with the hedonic approach in research mode, using clothing items with more complexity, before we can say whether the hedonic approach should be formally adopted as an alternative to our current method of quality adjustment for clothing items.
Release date: 1999-05-13 - Articles and reports: 62F0014M1998012Geography: CanadaDescription:
This paper examines the methods of adjustment for quality change made in the Canadian Consumer Price Index for the period 1989 to 1994. It finds that in most cases the current Canadian practice ensures that the replacement of one commodity by another, one variety of a commodity by another, or one outlet by another, has no impact on the overall index. The main exceptions to this result occur when replacing varieties of commodities that are purchased only occasionally, and a judgement is made that the quality ratio between the old and new variety is not the same as the ratio of their prices. In these cases there is an impact on the index, up or down, depending on whether the change in price reported is higher or lower than the change in quality. From the experience of the CPI in these six years there has been a correlation between the price ratio of a variety and its replacement and the index movement that derives from the judgement. The direction and size of the impact on the index depends largely on whether an item is replaced with a higher or lower priced item. For these reasons, the paper argues that more attention should be paid to ensuring that the item selection is more representative of current sales than has traditionally been the case.
Release date: 1999-05-13
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