many CPI components, a hedonic approach will likely be adopted before the next scheduled revision in 2002.” In fact, the move to expand the hedonics program has already accelerated in response to the fiscal year 1999 CPI improvement initiative.25 The initiative has added hedonic price adjustment to the following item groups:

  • microwave ovens (effective July 2000)

  • refrigerators (effective July 2000)

  • camcorders (effective January 2000)

  • VCRs (effective April 2000)

  • DVDs (effective April 2000)

  • audio products (12 products, effective January 2000)

  • college textbooks (effective July 2000)

  • washers and dryers (effective October 2000)

Specific CPI strata are chosen for the expanded hedonics program using the following criteria (Fixler et al., 1999:13):

  • There is a perception that the standard procedures inadequately account for quality change (it is unclear if BLS is focusing on items for which quality is perceived to be changing or specifically increasing).

  • There is a belief that hedonic models could be developed for at least a subset of items in a stratum (presumably beliefs must be supported by both data availability and theoretical considerations).

  • A significant percentage of price quotes exist for substitute items relative to the total number of price quotes for the stratum.

Fixler also notes that the list of candidates provides nice contrast in terms of placement within item life cycles. At one end, DVDs are new and have recently undergone rapid technological development while, on the other, refrigerators and microwaves are well into the product cycle and technology is comparatively stable. It is not surprising that the goods included in the initiative are from the “appliances including consumer electronics” category since it is a product area that has undergone highly visible change. (This category accounted for the largest share of the Boskin commission’s estimated 0.6 percent unmeasured quality and new goods bias.)

Much of the ongoing and proposed hedonics-related research must be supported by additional data collection, since routine CPI sampling procedures often

25  

The hedonics project was one component of the 1999 CPI improvement initiative, which also designated funds to expand the sample size of the Consumer Expenditure Survey (CEX), to quicken introduction of new products and CPI market updating, and to develop new superlative indexes (Liegey and Shepler, 1999:34).



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