from where it is today to where we aspire it to be. In this chapter, we discuss these two options.

THE CURRENT DATA COLLECTION PROCESS

The Consumer Expenditure Survey

The CEX is the primary tool for establishing CPI weights at the basic (218) item level. It is the most comprehensive source of combined household income and expenditure data produced by the statistical system; it is also very expensive to conduct. Nonetheless, a growing consensus is emerging among policy researchers that improvements should be made to the CEX. Probably the most frequently voiced criticism has been that the sample size is too small for the survey to be used for the range of applications to which it is currently put. However, another shortcoming of equal or greater importance—at least in the context of CPI construction—stems from nonsampling-related inaccuracies, such as survey response bias. Suggestions for improving the survey’s questionnaire design and substantive scope can be found in the research literature; in this section we review recent recommendations for upgrading the CEX, after first posing several questions that must be answered before a fully informed decision to change the survey can be made.

Accuracy

The panel’s foremost concern is with the extent of bias in the CEX which, in turn, affects the accuracy of CPI expenditure category weights. A starting point for evaluating household expenditure allocations estimated by the CEX is to compare them against weights generated by other sources. The Bureau of Economic Analysis (BEA) produces the most obvious alternative, the per-capita personal consumption expenditures (PCE) data, as part of the national income and product accounts (NIPA). During its postsurvey evaluation program, designed to identify areas in which the CEX could be improved, the Bureau of Labor Statistics (BLS) does compare the expenditure pattern of the CEX with that shown in the PCE component of the NIPA (Branch, 1994). Such comparisons might, depending on the outcome, raise a second question: Why not use, for the national CPI, upper-level weights derived from aggregate-level data, such as the PCE?2

2  

We note that a price index is already constructed using the PCE—the chain price index for personal consumption expenditures, or PCEPI. See Clark (1999) for a description of the differences between the PCEPI and the CPI in terms of index formula, scope of goods and services covered, underlying price information, and index performance.



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