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## At What Price?: Conceptualizing and Measuring Cost-of-Living and Price Indexes (2002) Commission on Behavioral and Social Sciences and Education (CBASSE)

### Citation Manager

. "9 Data Collection for CPI Construction." At What Price?: Conceptualizing and Measuring Cost-of-Living and Price Indexes. Washington, DC: The National Academies Press, 2002.

 Page 279

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At What Price?: Conceptualizing and Measuring Cost-of-Living and Price Indexes

cross classifications (e.g., Midwest Size A).15 The basic areas and item strata combine to form (218 × 54) = 11,772 basic CPI strata. Note that each of these basic CPI strata may be comprised of more than one ELI and more than one PSU.

Let h index the basic areas (h = 1, . . . ,54) and z index the item strata (z = 1, . . . . , 218). Until January 1999, BLS calculated Rthz—an estimate of the relative price change in basic area h, item stratum z, from period t - 1 to period t—using the formula when the samples of items within the item strata are selected with each unit having a probability proportional to quantity, or the formula

when the samples of items within the item strata are selected with each unit having a probability proportional to expenditure. In both forms the weights whi reflect the probability that item i in item stratum z is selected to be priced in basic area h—in the first of these the weights whi are essentially in the second the weights whi are essentially where phi is the probability that item i in item stratum z is selected to be priced in basic area h. Since January 1999, they have replaced this computation for most indexes (the housing index being the most notable exception) with a weighted geometric mean, namely

When one can obtain prices in basic area h for the universe of items in item stratum z, for both time periods t - 1 and t, then Rthz is given by the weighted average

or, if the geometric mean computation is used, is given by

where whi is the ratio of the expenditure in basic area h on item i of item stratum z to the expenditure in basic area h on all items of item stratum z. Since a census of the prices for the universe of items in item stratum z is impractical, BLS

 15 This count is based on the 1998 CPI item strata spreadsheet provided by Dennis Fixler (personal communication, 2000).
 Page 279
 Front Matter (R1-R16) Executive Summary (1-12) 1 Introduction (13-37) 2 Conceptual Foundations for Price and Cost-of-Living Indexes (38-93) 3 Index Domain (94-105) 4 Evolving Market Baskets: Adjusting Indexes to Account for Quality Change (106-154) 5 New Goods and New Outlets (155-177) 6 The Special Case of Medical Services (178-190) 7 Index Design and Index Purpose (191-221) 8 Whose Index? Aggregating Across Households (222-251) 9 Data Collection for CPI Construction (252-282) Appendix: Statistical Definition and Estimation of Price Indexes (283-292) References (293-306) Glossary (307-314) Biographical Sketches of Panel Members and Staff (315-318) Index (319-332)