TABLE 4-2 Major Effects on CPI Indexes from Five BLS Hedonic Studies

 

Change in Stratum Index

Average Price Change for Product Substitutions

Number of Monthly Substitutions in Product Group

Product

Stratum

Published

Hedonically Adjusted

Published

Hedonically Adjusted

VCR

Video excluding TVs

-13.2

-11.5

-7.4

-2.2

19

Audio products

Audio productsa

-7.4

-6.0

n.a.

n.a.

n.a.

Refrigerators

Major appliances

1.2

1.2

2.8

3.9

5

Microwaves

Major appliances

1.1

0.8

5.4

1.7

4

DVDsb

Video excluding TV

n.a.

n.a.

n.a.

n.a.

1

NOTE: Index and price changes shown in percent and at annual rates.

aNot a CPI stratum.

bToo few price quotes to estimate an adjustment to the overall stratum index.

quotes) to 21. For VCRs the noncomparables decreased from 63 (out of 130) to 47. BLS explains why using a hedonics system might identify different non-comparable cases from a given set of substitute quotes (Thompson, 2000:5):

For the purpose of calculating the quality adjusted index, all the substitutions were reevaluated. One of the benefits of using a hedonic model in evaluating substitutions is that the analyst has an opportunity to review price data and item characteristics with a statistical tool, thus enabling him/her to render judgments based on statistics rather than expert judgment alone.

When BLS uses hedonics, comparability of substitute quotes is judged not in terms of an a priori determination about the amount of quality change, but by the extent to which price change is predicted by the regression equation.34 For substitute price quotes, “differences in the specification or characteristics data of the old and new items were identified to see if the parameter estimates in the hedonic model could be utilized to quality adjust the official price change” (Thompson,

34  

The “standard” comparability decision in forced when a commodity analyst must add to the sample a replacement item that does not match the detailed description of the old one. The analyst judges comparability on the basis of an examination of any differences revealed by the checklists for the old and new versions of an item.



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