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Suggested Citation:"Index." National Research Council. 2002. At What Price?: Conceptualizing and Measuring Cost-of-Living and Price Indexes. Washington, DC: The National Academies Press. doi: 10.17226/10131.
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Index

A

ACNielsen, 266, 270-271

Aggregation. See also Subgroup indexes

across consumers, 26-27

across households, 4, 45, 79, 223-226, 230- 231, 240-246

for COGIs, 43, 77-79

for COLIs, 4, 15, 51-52, 53, 61-62, 85-86, 242

conceptual issues, 39, 51-52

in CPI, 15, 23-24, 243-244, 305, 308, 311

data collection issues, 27

defined, 305

demand, 243, 244

democratic indexes, 4, 5, 26-27, 45, 77-79, 86, 235 n.9

expenditure-weighted averaging, 26, 52, 60

geometric means formula, 5, 23, 24, 39, 50, 60, 77, 127, 210, 215 n.24, 279-280, 308

heterogeneity issue, 4, 26, 125 n.18, 223- 226, 229, 240-241

of individual price indexes, 44-45, 215, 235 n.9

lower-level, 23, 61-62, 309

mathematical approach, 77-79

in MCPI, 182, 188

national indexes, 4, 25, 26, 46, 87, 214, 219-221

plutocratic indexes, 4, 5, 26-27, 45, 77-79, 86, 235 n.9

population average of budget shares, 79

quality change adjustments and, 125 n.18

recommendations, 240-241

representative consumer concept, 241-246

strata indexes, 235 n.9

substitution effects and, 24-25, 26, 52

in superlative indexes, 52, 53, 215

upper-level, 24, 199, 311

user costs and, 34, 72

in wage indexes, 200-201

American Housing Survey, 11, 36, 147

Apparel, 29, 67, 72, 117, 118, 120 nn.11&12, 124, 130, 142, 147, 227

Appliances and electronics, 6-7, 72, 114, 131, 138, 141, 147, 148, 163 n.12, 233 n.7.

See also individual items

Area strata, 311

Automobiles, 28-29, 33, 35, 72, 107, 109, 110, 111, 119, 121, 124, 142, 147-148, 227, 233 n.7

Suggested Citation:"Index." National Research Council. 2002. At What Price?: Conceptualizing and Measuring Cost-of-Living and Price Indexes. Washington, DC: The National Academies Press. doi: 10.17226/10131.
×

B

Base period, 41, 42, 69, 305, 309, 311

Basket price index. See Cost-of-goods index

Bias

in CEX, 253, 254-255

duration neglect, 54

in hedonic quality adjustment methods, 128, 129, 133, 139, 140, 249

in inflation indexes, 217-218

in item replacement methods, 112-114, 121- 122, 136

MCPI, 148, 185-186, 188

new goods, 31, 32, 107-108, 112-121, 146- 148, 156-158, 160-161, 162, 273

outlet, 8, 33, 128, 168 n.16, 170, 172, 173- 174

point-of-introduction, 158-159, 160-161

reporting, 254-255

sample selection, 128, 156-157

seasonal, 234

substitution, 8, 33, 59-62, 93, 113, 128, 147, 168 n.16, 170, 172, 173-174, 248 n.18

within-sample, 140

Boskin commission, 38, 39

on conceptual basis for CPI, 3, 14, 41, 73

criticisms of CPI, 1, 14, 27, 62

defined, 305

on domain of CPI, 66, 96

new goods bias estimates, 32, 157, 162, 163

outlet substitution bias estimates, 173-174

quality adjustment bias estimates, 27, 108, 109 n.2, 112-114, 115, 116-117, 119, 121, 131, 139, 146-148

on subgroup indexes, 228, 229, 250

on theoretical validity of CPI, 109 n.2

Bureau of Economic Analysis (BEA), 4, 102, 105, 189, 210, 214, 253, 274, 310

Bureau of Labor Statistics, 306

charge to committee, 17

commodity analysts, 107, 306

quality adjustment approaches, 39, 73, 107- 108, 113 n.6, 114-122, 129-140

ScanData initiative, 266-267, 269

C

Capital gains and losses, 72

Cellular phones, 8, 31, 32, 107, 124-125, 140, 148, 156, 161, 165

Census Bureau, 255, 310

Centers for Medical and Medicaid Services, 10, 189, 190

Chain drift, 167, 257, 308

Chained index, 162, 167, 210, 253 n.2, 277, 305, 308, 310

Choke price. See Virtual price

Class-mean method, 117, 118, 119, 121, 134 n.30, 136-137, 139, 305-306

Climate change, 20

Commodities and Services (C&S) Survey, 11, 36, 37, 263, 281-282, 306

Commodity analysts (BLS), 107, 116, 118, 125, 134, 138-139, 306

Comparison situation

conceptual issues, 41, 42, 48-49, 51

period-based, 41, 306, 310, 311

place-based, 66-67, 69-70

Compensating variation, 48, 81, 153

Compensation issues

child support, 209

COGI and, 70, 71

COLI and, 48, 51, 58, 61, 70-71, 81

conceptual bases for indexes, 48, 51, 58, 61, 70-71, 81

domain considerations, 21, 70, 103-105

employer-paid benefits, 21, 98, 103-105

homeowners, 70-71, 72

MCPI components and, 186

social security recipients, 40, 43, 48

and standard of living, 48

superlative indexes, 60, 61, 191

Computers, 29, 109, 110, 117, 120 n.12, 124, 127, 129, 130, 134, 135, 140, 142, 147, 156, 166

Conceptual bases for indexes

aggregation of prices, 39, 51-52

availability of data and, 15, 42-43, 50

basket price (cost-of-goods) approach, 2-3, 14, 16, 18-19, 38-39, 41, 42-46, 47, 48- 49, 50, 57, 74-79, 94

COGI vs. COLI, 57-72

comparison situation, 41, 42, 48-49, 51

compensation issues, 48, 51, 58, 61, 70-71, 81

consumer demand functions, 49-50

cost-of-living approach, 2-3, 14, 15, 16, 18- 19, 38-39, 41, 43, 46-53, 57, 58, 65-68, 69, 79-93, 283-292

CPI, 1, 2-3, 8, 14, 18-19, 38, 39, 41, 42, 73

criticisms of, 40, 52-53

Suggested Citation:"Index." National Research Council. 2002. At What Price?: Conceptualizing and Measuring Cost-of-Living and Price Indexes. Washington, DC: The National Academies Press. doi: 10.17226/10131.
×

design considerations, 11, 40, 42, 43, 97, 191-192

domain-related, 3, 65-68, 94, 96-98

homotheticity in preferences, 49, 50-51

income changes, 2, 90

mathematical approach, 74-93

MCPI, 181-185

public perceptions and understanding of, 39, 58-59

purpose of index and, 40, 42, 43

quality adjustment, 2, 3, 14, 19, 28, 30, 39, 40, 57, 59, 62-64, 97-98, 106

reference period, 41, 42, 47-49, 51

satisfaction, 47, 53, 55-57

stochastic approach, 41-42, 68

stocks and flows, 33-35, 71-72

subpopulations and, 229-232

substitution effect, 2, 3, 39, 47-48, 50-51, 52-53, 58, 59-62

superlative indexes, 50-51, 53, 83-85

taste changes, 2, 53, 59, 64, 67, 69-70

test approach, 41-42, 50, 68

theoretical, 39, 40, 43-58, 73, 74-93

utility and choice, 47, 53-55

virtual demand for new commodities, 158 n.6

Conditional cost-of-living index (CCOLI), 39, 65-68, 69, 70, 86-90, 306

Congressional Budget Office, 259

Conrad, Kent, 228

Constant-elasticity-of-substitution (CES) price index, 6, 60-61, 91-93, 194

Constant utility index, 14

Consumer demand functions, 49-50, 306

Consumer Expenditure Survey (CEX), 42, 79, 213

accuracy, 12, 36, 253-256, 261

cost, 234, 253, 261

defined, 306, 307

description of, 189, 238, 244, 280-281

Diary Survey, 257, 280-281

expenditure weights, 11-12, 36, 253-256, 261, 274-275

frequency, 164-165, 256-257, 275

NIPA expenditure estimates compared, 214

POPS integrated with, 37, 264-266, 275

Quarterly Interview Panel Survey, 257, 280

questionnaire and structural issues, 36, 261- 262

research needs, 11-12, 261, 274-275

sample size, 12, 36, 131 n.25, 257-261

scanner technology and, 271-272

subgroup data, 4, 203 n.11, 227, 234, 236, 247, 248, 255, 259

substitution with new goods, 164-165

uses, 252, 261, 277, 281

Consumer Price Index (CPI)

aggregation in, 15, 23-24, 243-244, 305, 308, 311

biases in, 112-122, 129, 250

COLI-based, 2-3, 4, 14, 15, 18-19, 24, 94, 104, 110 n.3, 112, 144-145, 272-273

comparison period, 42

conceptual basis, 1-2, 8, 15-16, 18-19, 38, 39, 41, 42, 73, 94, 221

criticisms of, 1, 13, 14, 27, 39

defined, 306

domain, 3-4, 16, 17, 19-21, 73, 94, 105

experimental version (CPI-E), 11, 197, 203 n.11, 228, 246-250, 307

fixed-weight method, 14-15

growth of, 207-208

hedonic quality adjustment, 6-7, 132-137, 138, 139-140, 141

Housing Survey, 307

improvement initiative, 131 n.25, 145, 164, 166 n.14

introduction of new goods, 157, 161-167

item replacement, 134, 305-306, 307-308

item strata, 23, 130, 131, 156, 163, 307, 309

modified Laspeyres-based, 24, 49, 52, 61, 62, 97 n.2, 104, 111, 114, 221, 276-277, 306, 309

NIPA compared, 217, 219-221

product sampling and item identification, 107-108, 250

proxy prices, 72, 120, 307

PSU, 278-279, 310

quality adjustments, 14, 16, 27, 39, 106, 107, 110 n.3, 111, 112-122, 116-121, 130-137, 209-210

quantity-base period, 276-277

recalculation (CPI-U-RS), 202 n.8, 220, 307

reference period, 42, 276

research series, 210

revision frequency, 115, 166 n.13, 221

structure and elements, 23-24, 156, 163, 278-280, 307, 309

substitution behavior and, 15-16, 23-25, 26, 169-170, 113

superlative index, 24-25, 97, 191, 194-195, 207-208, 210

Suggested Citation:"Index." National Research Council. 2002. At What Price?: Conceptualizing and Measuring Cost-of-Living and Price Indexes. Washington, DC: The National Academies Press. doi: 10.17226/10131.
×

theoretical basis, 73

urban sample (CPI-U), 197-198, 203 n.11, 207, 211, 228, 247, 249, 250, 257, 307

uses, 1, 13-14, 35, 192, 218

wage-earner sample (CPI-W), 197-198, 203 n.11, 207, 228, 246, 250, 257, 307

weights/weighting, 11-12, 14, 15, 26, 104, 163, 179, 180, 198, 227, 307

Consumer substitution

COGI and, 5, 21-23, 25, 59, 70

COLI and, 2, 6, 25, 39, 47-48, 50-51, 52- 53, 57, 58, 59-62, 66, 90

conceptual issues, 2, 3, 39, 47-48, 50-51, 52-53, 58, 59-62, 242

defined, 306

and domain, 66, 95

full-service retail to discount outlets, 169- 170, 173

heterogeneity of, 26, 224

standard of living and, 73, 215 n.24

superlative index and, 5-6, 23, 25, 60, 61, 84, 85, 93, 96, 113 n.6, 215

Contingent valuation, 98

Contract rents, 307

Cost functions, 80, 82, 83-84, 85, 86, 91-92

conditional, 88-90

Gorman polar form, 245

rationed, 90

Cost-of-goods index (COGI). See also Laspeyres index;

Paasche indexes

aggregation, 43, 77-79

augmented, 103

averages of, 76-77, 82

base period, 41, 42, 74, 77

bias, 59

COLI compared, 2-3, 16, 18-19, 24, 38-39, 57-72

comparison period, 16, 21-23, 41, 42, 74

compensation issues, 70, 71

conceptual bases, 2-3, 14, 16, 18-19, 38-39, 41, 42-46, 47, 48-49, 50, 57, 74-79

defined, 1-2, 44, 306

domain, 19, 65-66, 94, 95

item replacement, 111-112

mathematical approach, 74-79

objectives, 16

outlet substitution bias, 8, 172, 176

public understanding of, 58

quality adjustment, 62-64, 111-112, 123

rationale for, 43

reference period, 16, 21-23, 41, 74

and substitution, 5, 21-23, 59, 70, 224

and taste change, 24, 69

theory, 43-46

time reversal test, 76-77

Cost-of-living index (COLI)

aggregation, 4, 15, 51-52, 53, 61-62, 85-86, 242

base period, 80-81, 82, 91, 92

calculation, 43-44, 49-50, 172

CES, 91-93

choice-based, 53-55, 57

COGI compared, 2-3, 16, 18-19, 24, 38-39, 57-72

comparison period, 41, 48-49, 51, 53

compensation calculation, 48, 51, 58, 61, 70-71, 81, 153

conceptual bases, 2-3, 14, 15, 16, 18-19, 38-39, 41, 43, 46-53, 57, 58, 65-68, 69, 79-93, 283-292

conditional, 3, 4, 39, 65-68, 69, 70, 73, 86- 90, 94-96, 115, 306

cost/expenditure function, 80, 82, 83-84, 85, 86, 89-90

counterfactual cost, 80, 91

criticisms and controversies, 15-16, 52-53

data collection, 289-292

defined, 2, 15, 95, 306

demand functions, 49-50, 63, 83, 84

democratic, 52, 242, 288, 292

domain, 3-4, 17, 19-21, 39, 65-68, 69, 70, 73, 86-90, 94-100, 104, 306

equivalent variation, 81, 153

expenditure, 195

Fisher ideal index as, 50, 52, 60, 286, 287, 288

geometric means formula, 5, 23, 24, 39, 50, 60, 77, 127, 210, 215 n.24, 279-280, 308

homotheticity of preferences, 49, 50-51, 60, 82, 84, 308

income effects, 2, 90

index numbers, 80, 91

indifference curve, 80, 86, 90, 91

item replacement methods, 110

Laspeyres–Paasche index relationship in, 23, 47, 48-49, 51, 80-82, 87, 90-91, 285, 287-289

mathematical approach, 79-83, 90-91

medical care, 19, 86-90

multiperiod, 104 n.10

new goods bias, 8, 31, 160, 161

Suggested Citation:"Index." National Research Council. 2002. At What Price?: Conceptualizing and Measuring Cost-of-Living and Price Indexes. Washington, DC: The National Academies Press. doi: 10.17226/10131.
×

objectives, 15, 16

outlet substitution bias, 8, 168, 172, 174, 176

plutocratic, 52, 242, 244, 287-288, 292

public understanding of, 58-59

quality adjustment, 2, 3, 18-19, 39, 57, 62- 64, 86-90, 109-114, 115, 123, 168

reference period, 41, 47-49, 51-52, 53, 82

representative consumer, 241-246

satisfaction-based, 55-57

Slutsky matrix, 90, 91

social, 51-52, 85-86

standard-of-living measurement, 3, 15 n.2, 19, 41, 46-47, 48, 49, 55-56, 59, 63, 69, 80, 82, 95

statistical definition and estimation of, 283- 291

substitution effects, 3, 6, 15-16, 39, 47-48, 50-51, 52-53, 57, 58, 59-62, 66, 90, 224

superlative indexes as, 50-51, 57

and taste change, 2, 16, 24, 69-70

Taylor series approximation, 90-91

theoretical bases, 2, 4, 15, 19, 40, 46-53, 58, 79, 83, 110, 113

“true,” 1, 13, 14, 48, 81, 82

unconditional, 4, 17, 66, 68, 69, 70, 73, 96- 98, 115

utility function, 53-55, 79-80, 82, 83-84, 85, 86-87

Counterfactual cost, 80, 91

Crime rates, 4, 20, 73, 95, 97, 98

Cross-outlet price linking, 169, 171

Current Population Survey (CPS), 201-202, 234, 274

D

Data collection for CPI, 306

C&S Survey, 11, 36, 37, 252, 263, 281-282

CEX, 11-12, 24, 36, 213, 227, 234, 236, 241, 244, 252-263, 271-272, 274, 280- 281

and conceptual bases for indexes, 15, 42-43, 50, 197

costs, 232, 234, 271

for democratic indexes, 215-216, 223

for hedonic quality change adjustments, 124, 126 n.19, 128-129, 131-132, 135, 143, 144

heterogeneity of consumers and, 27, 223, 231, 241

integrated CEX/POPS, 37, 264-266, 271, 275

lagged, 6, 15, 25, 31-32, 42-43, 50, 57, 61, 76, 129, 144, 165, 183, 219-220, 256- 257

from manufacturers/vendors, 132 n.26

MCPI, 9, 183

modified Laspeyres, 276-277

new goods, 30-32, 163-165

nonsampling errors, 260 n.5

POPS/TPOPS, 11, 36-37, 163-164, 167- 168, 227 n.3, 232, 233 n.5, 234, 262, 267, 281-282, 310

recommendations, 5, 11-12, 241, 261, 274- 276

sample rotation, 8, 31, 33, 119-120, 140, 156, 157, 163, 164, 165, 167, 172

sampling errors, 260 n.5

with scanners, 5, 43, 45, 129, 142 n.35, 197, 233, 234, 235, 236, 241, 266-273, 275, 289, 291

scope of, 23, 27, 226-227

Standard Industrial Classification system, 264

for subgroup indexes, 4, 5, 27, 197, 226- 228, 229, 231-235, 241

Deletion method, 117, 118, 119-120, 125, 128, 135, 136-137, 139, 305, 307

Demand

aggregation, 243, 244

functions, 49-50, 63, 83, 84

for new commodities, 158 n.6, 159-160

Democratic indexes

aggregation, 4, 5, 26-27, 45, 77-79, 86, 235 n.9

data collection for, 215-216, 223, 252, 270- 271

defined, 52, 307

new goods in, 160 n.8, 162

for public transfer program indexing, 198- 199

for subgroups, 5, 26-27, 229, 237-240

Demographic issues, and index construction, 24-25, 26, 32, 53, 110, 172-173

Design of indexes. See also Conceptual bases for indexes;

Domain of indexes;

Public transfer payment indexing;

Social security benefits

and conceptual framework, 11, 40, 42, 43, 97, 191-192

inflation-indexed treasury securities, 192, 210-212

Suggested Citation:"Index." National Research Council. 2002. At What Price?: Conceptualizing and Measuring Cost-of-Living and Price Indexes. Washington, DC: The National Academies Press. doi: 10.17226/10131.
×

inflation indicators, 216-221

limits on, 35

for monetary policy setting, 35, 40, 192, 216-221

as output deflator, 35, 214-216, 218

for poverty line, 40

for private contracts, 35, 192, 208-210, 218

for social security compensation, 11, 35, 40, 43, 48, 192

tax-related, 35, 40, 43, 192, 212-214

wage-related, 11, 35, 199-206, 207-208

Diewert, W. Erwin, 23

Direct characteristics method, 126, 128-129, 133, 142, 143-144, 152-154

Direct comparison method, 109, 116-118, 139, 307

Direct consumption costs, 213

Direct time dummy method, 126-128, 143, 145-146, 151-152, 153

Directed reinitiation, 155 n.1

Disaggregation of households, 45

Domain of indexes. See also Design of indexes

COGI, 19, 65-66, 94, 95

compensation issues, 21, 70, 103-105

conceptual issues, 3, 65-68, 94, 96-98

conditional COLI, 4, 39, 65-68, 69, 70, 73, 86-90, 95-96, 306

CPI, 3-4, 16, 17, 19-21, 73, 94, 105

cross-place comparisons, 66-67

current practice, 65

and economic indicators, 97

employer-paid benefits, 21, 98, 103-105

environmental variables, 4, 16, 19-20, 66- 67, 73, 94-102, 105

MCPI, 9, 10, 95, 97-98, 178-179, 185-186, 189-190, 220

measurement problems, 20, 21, 97, 98-102

NIPA, 220

public goods, 4, 19-21, 94, 96, 98-102, 104

and public transfer programs, 97

quality changes and, 67, 95, 97-98, 101

recommendations, 4, 105

separability issue, 68

substitution and, 66, 95

superlative indexes, 95-96

supplemental indexes and satellite accounts, 4, 101-102, 103, 105

taxes and, 20-21, 97, 102-103

technological changes and, 67-68, 88-89, 97

unconditional COLI, 4, 17, 66, 68, 69, 70, 96-98

Durable goods, 71-72, 230 n.4

DVDs, 131, 138

E

e-Commerce, 170-173

Econometric modeling

of demand functions, 49-50, 63

of new goods, 160

of quality adjustments, 63, 64, 139, 145-146

Economic theory of consumer behavior, 2, 19, 40, 46-53, 58, 79, 83, 110, 242, 243

Elderly, price indexes for, 11, 196-197, 199, 207, 228-229, 249-251

Employer-paid benefits, 9, 10, 21, 98, 103-105, 179, 201, 220

Employment Cost Index (ECI), 201

Entry-level items (ELI), 136, 140, 155 n.1, 164, 165, 167, 234, 236, 262, 307

Environmental (outside) variables

benefit—cost assessment, 100 n.7

conceptual issues, 66-67, 69, 94-98

CPI domain, 4, 19, 73, 105

measurement, 16, 19, 20-21, 98-102

superlative indexes and, 53

taxes and, 20-21, 103

theoretical framework, 86-87, 88

Equivalent variation, 81, 153

Expenditure function, 80

Expenditure weight, 26-27, 52, 86, 166, 167, 307

Expenditure-weighted averaging, 26, 52, 60

F

Fads, 159 n.7

Federal income tax system. See Taxes

Fisher ideal index

for aggregation, 52, 86, 215, 221, 248

COLI approximation, 82, 83-84

construction approach, 42-43, 50

defined, 77, 308, 310

introduction of new goods, 162 n.10

mathematical approach, 77, 83-84, 85

plutocratic, 79

production lag, 42-43

publication of research series, 210

quality change adjustment, 152, 153

real-time, 219-220

and substitution bias, 23, 52, 60, 248 n.18

Suggested Citation:"Index." National Research Council. 2002. At What Price?: Conceptualizing and Measuring Cost-of-Living and Price Indexes. Washington, DC: The National Academies Press. doi: 10.17226/10131.
×

Fisher, Irving, 23, 41

Fixed-weight index, 308

Food and beverages, 64, 83, 112, 117, 146, 159, 160, 170, 173, 174

G

Geometric means formula, 5, 23, 24, 39, 50, 60, 77, 127, 210, 215 n.24, 308

Gillingham-Greenlees exact index, 213-214

“Goodness” of goods, 64

Griliches neutrality, 151, 152

Gross domestic product (GDP), 13-14, 98 n.4, 100, 179, 209, 211, 216, 217, 218, 220, 221, 240

Group indexes. See Subgroup indexes

H

Health insurance, 9, 10, 21, 104-105, 179-180, 185-188, 189, 203, 220

Health status, as utility function, 87-90, 95, 187

Hedonic functions, 123, 149

Hedonic quality adjustment, 64

advantages, 123

assessment of methods, 7, 145-146

audit of other methods with, 6, 120, 128

backward-looking method, 150

bias in, 128, 129, 133, 139, 140

BLS application of, 108, 113 n.6, 129-140

brand-specific, 132-133, 145-146

candidates for, 28-29, 119, 124, 130-132, 142

characteristics method, 126, 128-129, 133, 142, 143-144, 152-154

comparability decisions for, 6, 28, 29, 134- 139, 140, 142, 145

complementary products, 142-143

consumer heterogeneity and, 124-125

CPI model, 6-7, 132-137, 138, 139-140, 141

data requirements, 124, 126 n.19, 128-129, 131-132, 135, 143, 144, 269

defined, 101

direct methods, 29, 121, 126-129, 134, 143- 144, 151-154, 306, 307

effect on CPI, 134-137, 138

forward-looking method, 150

indirect methods, 29, 125-126, 127 n.22, 129, 130, 132, 134, 135-136, 144, 150- 151, 308-309

limitations of methods, 140

list price vs. transaction price, 132

mathematical description of, 123-124, 149- 154

in MCPI, 187-188

new goods and, 7

outlet substitution and, 174, 176

panel cautions, 6-7, 133-134, 139-140, 141, 144-145

principle, 6, 122

recommendations, 6-7, 140-146

reliability, 7, 124, 129-130

time dummy method, 126-128, 143, 145- 146, 151-152, 153

updating intensities, 144

uses, 29, 122, 123, 124, 130, 135

Hedonic treadmill hypothesis, 56, 69-70

Heterogeneity. See also Subgroup indexes

across-stratum, 223-224, 227, 229

and aggregation, 4, 26, 125 n.18, 223-226, 229, 240-241

and construction of indexes, 18, 26, 226, 240-241

and data collection methods, 223, 241

and hedonic quality adjustment methods, 124-125

and inflation rates, 222, 225-226

and outcomes-adjusted medical index, 184

in prices paid, 46, 225-226, 227 n.3

public goods preferences, 99 n.6

in substitution behavior, 26, 224

within-stratum, 223, 227-228

Household

aggregation across, 4, 223-226, 240-246

disaggregation into individual members, 45

furnishings and equipment, 72, 254

modeling non-unitary behavior, 45

production function, 123 n.16

scanner technology, 271-272

Housing. See Shelter

I

Imputation of prices, 121, 136, 159, 305

Income distribution, 24-25, 26, 53, 199, 206, 227, 239-240, 243

Income effects, 2, 90, 224

Index drift, 167, 168 n.17, 257, 308

Indifference curve, 80, 86, 90, 91

Individual price indexes, 44-46, 78-79

Suggested Citation:"Index." National Research Council. 2002. At What Price?: Conceptualizing and Measuring Cost-of-Living and Price Indexes. Washington, DC: The National Academies Press. doi: 10.17226/10131.
×

Inflation rates

age stratification, 246, 249-251

core, 218

effects of bias in indexes, 217-218

heterogeneity and, 222, 225-226

income stratification, 239-240, 247-249

long-run, 61

macroeconomic policy indicators, 1, 97, 198, 216-221

NIPA vs. CPI, 217

quality change adjustments and, 27, 225

and relative price variation, 225

stripped, 218-219

subgroup differences, 222, 239-240, 246- 251

tax-rate indexing, 13, 40, 43, 212-214, 222

Treasury securities indexed to, 1, 192, 210- 212

Information Resources, Inc., 266, 271

Input substitution, 10, 181-184, 188-189

Interest rates (nominal), 72

Internet, 45, 170-173

Item reclassification, 31, 155, 162, 163, 165- 166, 167

Item replacement. See also Substitution

class-mean method, 117, 118, 119, 121, 134 n.30, 136-137, 139, 305-306

COLI calculations, 110

comparability decisions by analysts, 6, 28, 29, 116-117, 118, 134-139, 140, 142, 145

defined, 106, 309

deletion method, 117, 118, 119-120, 125, 128, 135, 136-137, 139, 305, 307

direct comparison method, 109, 116-118, 139, 307

explicit cost-based adjustment, 28-29, 118- 119, 125, 134, 307-308

in-store procedure, 125, 126, 134, 156

overlap pricing, 117, 118, 119, 310

quality adjustments, 28-29, 31, 106, 110, 116-121, 125, 130-132, 135, 156

research recommendations, 141

targeted, 8, 130-132, 164, 166

within-sample, 156, 161

Item rotation, 31, 164, 168

Item strata, 23, 156, 162, 164, 167, 307, 309, 311

Item weighting, 247-248, 309

K

Konus, Alexander, 23

L

Laspeyres index, 308

advantages, 44, 60, 75-76

aggregation, 77-79, 86

and COLI, 47, 48-49, 50, 51, 53, 59, 80-82, 87, 90-91

complexity, 58

conceptual basis, 42

defined, 42, 44, 309

democratic, 242

domain, 68

escalation with, 81, 215

as inflation indicator, 218, 247, 248

introduction of new goods, 158 n.6, 161- 162

mathematical approach, 74-79

modified for CPI, 25, 62, 97 n.2, 111, 114, 168 n.17, 272-273, 306, 309

national vs. individual, 44-46, 78

outlet rotation and, 168 n.17

quality adjustments, 111-112, 129, 152, 153, 154

quantity used for pricing, 72, 78, 82-83

representative agent, 246, 247, 248

seasoned, 62

substitution bias, 5, 21-23, 24, 59, 60, 62, 251 n.20

utility function, 92

weights, 45, 75

Law of one price, 169 n.18, 172, 180, 187

Life expectancy, 4, 20, 28, 67, 73, 96, 97-98, 184

Link period, 309

M

Macroeconomic policy, inflation indicators for, 1, 35, 40, 97, 192, 216-221

Marshall Edgeworth price index, 77

Medical Care Price Index (MCPI)

aggregation, 182, 188

bias in, 148, 185-186, 188, 250-251

conceptual issues, 17-18, 19, 30, 96, 181- 185

Suggested Citation:"Index." National Research Council. 2002. At What Price?: Conceptualizing and Measuring Cost-of-Living and Price Indexes. Washington, DC: The National Academies Press. doi: 10.17226/10131.
×

consumer heterogeneity and, 224, 228

current procedures, 178-181

data collection, 9, 183, 255-256

defined, 309

diagnosis-based pricing, 9, 182-184, 188-189

domain, 9, 10, 20 n.5, 86-90, 96, 97-98, 105, 178-179, 185-186, 189-190, 220

for the elderly, 197, 203, 249, 250-251

health insurance considerations, 9, 10, 21, 104-105, 179-180, 185-188, 189, 220, 255

hospital and physician services, 30, 112, 148, 181

input substitution, 10, 181-182, 188-189

measurement issues, 17-18, 181-185

outcomes-adjusted, 10, 181, 184, 187, 190

prescription drugs, 30, 112, 148, 163, 186

quality adjustments, 10, 19, 20 n.5, 28, 30, 40, 67, 86-90, 112, 114, 117, 148, 181, 184-185, 187-188, 190

recommendations, 9-10, 105, 188-190

weights, 9, 179, 180, 182, 183, 184, 185, 186, 189, 203, 214 n.22, 220, 255

Medicare and Medicaid, 9, 180, 182, 185, 203, 214 n.22, 220, 225, 255

Microwave ovens, 29, 116, 118, 131, 133, 137- 138

Motor vehicle accident rates, 96

N

National Bureau of Economic Research, 311

National economic accounts, 4, 20, 101-102, 105

National Income and Products Accounts, 89, 102 n.8, 179, 203, 214-215, 216, 217, 219-221, 253, 254

National price indexes, 4, 8, 25, 26, 44-46, 78- 79, 87, 160, 214, 219-221

National security, 21, 96, 97

New goods

bias, 31, 32, 107-108, 112-121, 146-148, 156-158, 160-161, 162, 273

data collection issues, 30-32, 163-165, 273

defined, 7, 155-156

demand for, 158 n.6, 159-160

effect, 31-32, 67-68

improved goods contrasted, 106-107

introduction into index, 7-8, 31-32, 97-98, 111, 112, 120 n.12, 131 n.25, 135, 155 n.1, 161-167

item reclassification, 31, 155, 162, 163, 165-166, 167

measurement issues, 7, 31-32

outlet rotation and, 7, 31, 32, 135, 155, 164, 168

in output-change indexes, 215, 216

plutocratic vs. democratic index, 160 n.8, 162

price cycle, 32, 161-163

quality-improved items, 31, 156, 161

recommended adjustments for, 8, 160-161, 165

sample rotation frequency, 8, 31, 163-164, 165, 167

supplemental, 107, 155 n.1, 163

valuation of, 3, 18, 64, 73, 110, 155, 157-161

variety considerations, 110 n.3, 114, 146

virtual price vs. introductory price, 8, 31, 157-160, 311

weight updating, 32, 155, 163, 166, 167

welfare effects, 31, 157, 159, 160

New outlets. See Outlet rotation;

Outlet substitution

Nonlinear pricing, 107

Nonsampling errors, 260 n.5

Norwood, Janet, 228

O

Outcome pricing, 190

Output deflation, 1, 13-14, 35, 98, 101-102, 214-216, 218, 240

Outlet rotation

cross-outlet price linking, 169, 171

current practice, 167-173

defined, 309

e-commerce and, 170-173

hedonic techniques applied to, 174, 176

market shift to discount stores and, 8, 33, 169-170, 173, 176

new-product introduction, 7, 31, 32, 135, 155, 164, 168

pricing components, 9, 171, 172, 174-175, 176, 263

probability of selection, 167-168

purpose, 167-168

quality-related issues, 8-9, 32-33, 168-170, 171, 172, 173, 174-175, 176

recommendations, 9, 176-177

sampling frequency, 33, 164, 173

substitution bias, 8, 33, 128, 168 n.16, 170, 172, 173-174

Suggested Citation:"Index." National Research Council. 2002. At What Price?: Conceptualizing and Measuring Cost-of-Living and Price Indexes. Washington, DC: The National Academies Press. doi: 10.17226/10131.
×

Outlet substitution, 8, 128, 168-170, 172, 173- 174, 176, 224, 230, 273, 310

Overlap pricing, 117, 118, 119, 176, 310

P

Paasche indexes, 308

aggregation, 77-79

averaging, 79

COLI and, 48-49, 50, 51, 53, 80-82, 87, 91

conceptual basis, 42

defined, 42, 44, 310

democratic, 79

introduction of new goods, 158 n.6, 162

mathematical approach, 75-79, 91

national vs. individual, 79

quality adjustments, 129, 152, 153, 154

representative agent, 246, 247, 248

substitution bias, 22-23, 251 n.20

usefulness, 57

utility function, 92

Penetration pricing, 163 n.11

Pension plans, employer-provided, 104, 203- 204

Personal consumption expenditure (PCE) data, 12, 37, 253-256, 274-275, 310

Personal consumption expenditure (PCE)

deflator, 220, 221, 310

Plutocratic indexes

aggregation, 4, 5, 26-27, 45, 77-79, 86, 235 n.9

bias, 244

COLI, 52, 242, 244

defined, 52, 222, 310

introduction of new goods, 160 n.8, 162

output-change measurement, 215

for public transfer program indexing, 198- 199

for subgroups, 5, 26-27, 229, 237-240

Point of Purchase Survey (POPS/TPOPS), 11, 36-37, 163, 167-168, 227 n.3, 232, 233 n.5, 234, 262, 264-266, 272, 281-282, 310

Pollution, 4, 97, 98, 101-102, 103

Preferences

and COLI, 47, 49, 50, 54, 79-80

flexible functional form, 84, 86, 142 n.35

homothetic, 49, 50-51, 60, 82, 84, 92, 308

revealed, 54, 99

separability of, 68

Price heterogeneity, 46, 225-226

Private contracts, indexing, 35, 97, 192, 208- 210, 218

Private goods

as bundles of characteristics, 122-123

characteristics, 108, 111, 112

defined, 20, 310

domain of CPI, 4

government-produced and -sold, 19, 20, 94 n.1

separability from public goods, 68

Producer price index (PPI), 130, 148, 174 n.23, 209, 219, 220

PSU, 278-279, 281-282, 310

Public goods

defined, 20, 310

domain considerations, 19, 20-21, 94, 96, 98-100, 102-103, 104

pure, 21

sales taxes and, 21, 102-103

separability from private goods, 68, 103

valuation problems, 19, 98-100

Public perceptions

of indexes, 39, 58-59

of quality, 111

Public transfer payment indexing, 13

beneficiaries with other income, 195-197

consumer heterogeneity and, 226, 231

CPI-U vs. CPI-W, 193, 197-198

criticisms of CPI, 13

domain issues, 97

for elderly people, 196-197, 207

lagged superlative index for escalation, 24, 25, 191, 194-195

plutocratic vs. democratic indexes, 198-199, 240

poverty-related programs, 206-207, 247

recommendations, 194-195

social security adjustments, 13, 25, 193- 199, 200, 204-206

SSI, 193, 206

for subgroups, 192-193, 206, 231

tax considerations, 195-196

wage indexes, 199-206

Pure price changes, 29, 127, 216, 230

Q

Quality change adjustments

and aggregation, 125 n.18

apparel, 29, 117, 118, 120, 130, 147

Suggested Citation:"Index." National Research Council. 2002. At What Price?: Conceptualizing and Measuring Cost-of-Living and Price Indexes. Washington, DC: The National Academies Press. doi: 10.17226/10131.
×

appliances and electronics, 29, 107, 109, 110, 114, 118, 120 n.12, 130, 131, 132, 133, 147

bias in, 27-28, 112-114, 121-122, 129, 133, 139, 140, 144, 249

BLS approaches, 39, 73, 114-122, 129-140

Boskin Commission criticisms, 27-28, 109 n.2, 112-114, 115, 116-117, 119, 120, 146-148

COGI view, 2, 62-64, 111-112

COLI view, 2, 3, 18-19, 39, 57, 62-64, 86- 90, 109-111, 112-114, 115

conceptual issues, 14, 19, 28, 30, 39, 40, 57, 59, 62-64, 98, 106

cost-based, 28-29, 118-119, 125, 134, 307- 308

in CPI, 14, 16, 18-19, 27, 39, 106, 111, 112-114, 115, 116-121, 130-137, 209- 210

defined, 114

domain issues, 67, 95, 97-98, 101, 115

durability of goods and, 71-72

food and beverages, 64, 108, 112, 117, 123, 146

forms of, 106-107

and inflation rates, 27, 225

item replacement methods, 27, 28-29, 31, 106, 110, 111, 116-121, 134, 140-141

items targeted for, 130-132

measurement/modeling, 28-30, 63-64, 108, 122;

see also Hedonic quality adjustment

medical care, 10, 19, 20 n.5, 28, 30, 40, 67, 86-90, 96, 112, 114, 117, 148, 184-185, 187-188, 190

new goods bias, 31, 107-108, 112-114, 115, 146-148, 156, 161

outlet rotation and, 8-9, 168-170, 171, 172, 173, 174-175, 176

per unit approximations, 107

private contracts, 209-210

rates, 106, 137, 139

recommendations and cautions, 140-146

repackaging framework, 107-108, 111-112, 116-117, 156

for services, 115, 122, 141-142, 148, 168

shelter, 146-147

subgroup indexes and, 230

taste change and, 16, 64, 69, 95, 111

transportation, 28-29, 109, 110, 111, 117, 119, 123, 147-148

valuation of new goods, 3, 18, 64, 73, 156

variety of goods and, 110 n.3, 114 n.8

wage indexes, 204, 209-210

within-sample, 115, 121-122, 140, 156

Quality-of-life metrics, 185

R

Reference period, 306, 309, 310, 311

conceptual issues, 41, 42, 47-49, 51

hedonic function, 125

Regional/city price indexes, 66-67, 237, 252

Representative consumer, 241-243

COLI for, 244-246

conditions for existence of, 243-244

Retail Trade Survey, 255

S

Sample rotation, 8, 31, 33, 119-120, 140, 156, 157, 163-164, 165, 167, 172

Sampling errors, 260 n.5

Satellite accounts, 4, 101-102, 103, 105

Satisfaction. See also Utility

concept, 47, 53, 55-57

hedonic treadmill hypothesis, 56, 69-70

measures of, 55-57

and utility, 55-57

Scanner data

and COLI-based CPI, 272-273, 275

and hedonic modeling, 142 n.35

household-based technology, 271-272, 275

limitations, 270-271

point-of-sale, 266-271, 275

and quality of CEX and POPS, 272

Seasoning procedure, 62

Semiconductors, 162

Separability of preferences, 68

Services

expenditure categories, 115, 122, 141, 148

flows from consumer capital goods, 33-35, 71-72, 102

pricing, 163 n.12, 172

Shadow price, 90, 158

Shelter

compensation issues, 70-71

consumer heterogeneity and, 224, 236 n.11

data collection, 254, 256, 262 n.6, 263

homeowners vs. renters, 70-71, 72

item category, 307

Suggested Citation:"Index." National Research Council. 2002. At What Price?: Conceptualizing and Measuring Cost-of-Living and Price Indexes. Washington, DC: The National Academies Press. doi: 10.17226/10131.
×

outlet substitution and, 170

price indexes, 45, 72

quality adjustments, 29, 130, 146-147

service flows from housing, 33-35

Shephard’s Lemma, 82-83, 90, 91

Slutsky matrix, 90, 91

Social cost-of-living index, 51-52, 85-86, 242

Social issues, 96

Social security benefits

aggregation issues, 4, 200-201

bias in CPI, 14

consumer heterogeneity and, 226

cost-of-living adjustments, 1, 11, 13, 25, 40, 48, 61, 193-195, 198, 240

CPI-U tied to, 198

democratic vs. plutocratic weights, 240

design of indexes, 11, 35, 40, 43, 48, 192

domain issues, 97, 104, 196

employers’ contributions to, 104

initial retirement benefit, 200

other income with, 71, 195-197

rate of increase, 205-206

superlative index for escalation, 11, 6, 25, 61, 198

tax-and-price index tied to, 195-196

timeliness of data collection, 6, 43

wage-based indexing, 11, 199, 200-201, 204-206, 246 n.17

Standard of living

compensation issues, 48, 71

defined, 311

environmental considerations, 19, 95, 96-97

measurement for COLI, 15 n.2, 41, 46-47, 48, 49, 55-56, 59, 63, 69, 80

public goods and, 98

quality of goods and, 63

satisfaction and, 55-56

social security recipients, 71, 97

substitution behavior and, 73

Stigler committee, 1, 3, 14, 38, 73, 122 n.14, 311

Stochastic approach, 41-42, 68

Stocks and flows, 33-35, 71-72, 102

Subgroup indexes. See also Aggregation;

Heterogeneity

aggregation issues, 4, 5, 26-27, 229

assembly of data for, 232-235

barriers to production, 226-228

biases, 250, 251

conceptual bases, 229-232

costs, 232-235

data collection, 4, 5, 27, 197, 226-228, 229, 231-235, 252, 276

for elderly people, 11, 27, 125, 196-197, 199, 227, 228-229, 231, 249-251

income-stratified, 27, 125, 206-207, 227, 231, 247-249

inflation rates and, 246-251

plutocratic vs. democratic weights, 5, 26- 27, 229, 235 n.9, 237-240

and quality changes, 125, 230, 251

recommendations, 5, 97 n.2

with reference-period weights, 194

research and testing suggestions, 235-237

sample size, 233, 234

of strata prices, 234, 238-239

uses, 231

Substitution. See also Consumer substitution

and aggregation, 24-25, 26, 52

bias, 59-62, 93, 113, 128, 147, 168 n.16, 170, 172, 173-174, 248 n.18

CPI, 15-16, 23-25, 113, 224, 230

data collection methods and, 269

elasticity of, 6, 60-61, 91-93, 194, 269

input, 10, 181-184, 188-189

lower-level, 147, 309

new goods, 164-165

outlet, 118, 128, 135, 168 n.16, 170, 172, 173-174, 310

upper-level, 311

within-strata effect, 5

Superlative indexes. See also Fisher ideal index;

Törnqvist index;

Walsh price index

advance estimate of, 195

aggregation, 52, 53, 215

as COLI approximation, 50-51, 57, 95-96

compensation calculations, 60, 61, 194-195

conceptual bases, 50-51, 53, 83-85

data collection for, 259, 272-273

defined, 308, 311

domain, 95-96

endorsement for CPI, 97 n.2

environmental variables, 53, 87, 95-96

as inflation indicator, 218, 248

introduction of new goods, 162 n.10

lagged for escalation, 24, 25, 191, 194-195, 207-208, 210

mathematical approach, 83-85

quality adjustments, 129, 131

Suggested Citation:"Index." National Research Council. 2002. At What Price?: Conceptualizing and Measuring Cost-of-Living and Price Indexes. Washington, DC: The National Academies Press. doi: 10.17226/10131.
×

from social aggregate indexes, 86

for social security cost-of-living adjustments, 11, 6, 25, 61, 198

substitution effect, 5, 6, 23, 24, 25, 60, 61, 84, 85, 93, 96, 113 n.6, 215

taste changes and, 25

Supplemental goods, 107, 155 n.1, 163

Supplemental Security Income (SSI), 206-207

T

Taste changes

COGI vs. COLI, 2, 16, 24-25, 69-70

conceptual issues, 53, 59, 64, 67, 69-70

domain issues, 67, 69, 95

habit formation, 70

and quality changes, 16, 64, 69, 110 n.3

and substitution effect, 25

Tax-and-price index, 195-196

Taxes

aggregation across households, 4

consumer heterogeneity and, 226

data collection issues, 270

democratic vs. plutocratic weights, 240

design of indexes, 35, 40, 43, 192, 212-214

direct consumption costs, 213

domain issues, 20-21, 97, 102-103

exact indexation measure, 213-214

indirect, 102 n.8, 195

public goods offset to, 20-21, 102-103

and public transfer program indexing, 97, 195-196

rate-related indexing, 13, 40, 43, 212-214

Taylor series approximation, 90-91

Technological change, 45, 53

domain issues, 67-68, 88-89, 97

“new goods” effect, 67-68, 162

Televisions, 29, 110, 130, 133, 135, 137, 142, 147

Test approach, 41-42, 50, 68, 267

Theoretical bases of indexes

basket-price, 43-46

and conceptual basis, 39, 40, 43-58, 73, 74- 93

cost-of-living, 2, 15, 40, 46-53, 58, 79, 83, 86, 110, 113

CPI, 4, 73

criticisms of, 40, 52-53

satisfaction and, 47, 55-57

utility and choice and, 47, 53-55, 110 n.3

Tiebout hypothesis, 99 n.6

Time reversal test, 76-77

Törnqvist index, 85, 93, 248, 311

Transaction costs, 71, 72

Transfer payments. See Public transfer payment indexing ;

Social security benefits;

specific programs

Transportation, 72, 109, 112, 117, 122, 147- 148, 173, 233 n.7

Treasury Department, 259

Treasury Inflation-Protected Securities (TIPS), 1, 192, 210-212

U

Union wage contracts, 13, 207-208, 218

Unit pricing, 268-269

Unit value indexes, 236

User costs, 34, 71-72

Utility

and choice, 47, 53-55, 110 n.3

decision, 54-55, 57

defined, 53-54, 311

duration neglect bias, 54

environmental factors and, 86-87

experienced, 54, 55, 56-57

function, 79-80, 83-84, 85, 86-90, 92

measures of, 53, 54, 55, 57

predicted, 54

remembered, 54

satisfaction and, 55-57

V

Variety of goods, 110 n.3, 114, 146

VCRs, 8, 31, 115, 131, 132, 133, 137, 138, 139, 156, 162, 163, 165, 166

Virtual price, 8, 31, 157-160, 311

W

Wage indexes

aggregation issues, 200-201

alternatives, 199-206

design issues, 11, 35, 199-206, 207-208

employer-paid benefits in, 201-204

escalators in union contracts, 13, 207-208

hourly earnings, 202 n.9

macroeconomic implications, 205, 218

Suggested Citation:"Index." National Research Council. 2002. At What Price?: Conceptualizing and Measuring Cost-of-Living and Price Indexes. Washington, DC: The National Academies Press. doi: 10.17226/10131.
×

mean wage measure, 202, 203 n.10

median wage measure, 202, 205

quality adjustments in, 204

social security benefits tied to, 11, 199, 200, 204-206

Walsh price index, 77, 85

Weighted arithmetic mean, 75, 215 n.24

Weighted harmonic mean, 75, 79

Weights/weighting

across-stratum, 227

democratic, 45, 78, 237-240

expenditure, 26, 45, 60, 76 n.1, 86, 166, 167, 198, 227, 307

fixed-weight index, 308

item (upper-level), 97 n.2, 309

Laspeyres index, 45, 75

MCPI, 9, 179, 180, 182, 183, 184, 185, 186, 189, 214 n.22, 220

for new products, 8, 32, 155, 163, 166, 167

plutocratic, 45, 78, 79, 237-240

updating, 8, 32, 96, 155, 163, 166, 167

Welfare effects, 31, 157, 159, 160, 242

Welfare index, 14

Well-being, inputs to, 109-110, 115

Within-sample

item replacement, 156, 161

quality adjustments, 115, 121-122

Suggested Citation:"Index." National Research Council. 2002. At What Price?: Conceptualizing and Measuring Cost-of-Living and Price Indexes. Washington, DC: The National Academies Press. doi: 10.17226/10131.
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How well does the consumer price index (CPI) reflect the changes that people actually face in living costs—from apples to computers to health care? Given how it is used, is it desirable to construct the CPI as a cost-of-living index (COLI)? With what level of accuracy is it possible to construct a single index that represents changes in the living costs of the nation’s diverse population?

At What Price? examines the foundations for consumer price indexes, comparing the conceptual and practical strengths, weaknesses, and limitations of traditional “fixed basket” and COLI approaches. The book delves into a range of complex issues, from how to deal with the changing quality of goods and services, including difficult-to-define medical services, to how to weight the expenditure patterns of different consumers. It sorts through the key attributes and underlying assumptions that define each index type in order to answer the question: Should a COLI framework be used in constructing the U.S. CPI?

In answering this question, the book makes recommendations as to how the Bureau of Labor Statistics can continue to improve the accuracy and relevance of the CPI. With conclusions that could affect the amount of your next pay raise, At What Price? is important to everyone, and a must-read for policy makers, researchers, and employers.

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