ACCOUNTING FOR THE EFFECTS OF NEW AND DISAPPEARING GOODS USING SCANNER DATA

With the "discovery" of scanner data by statistical agencies and researchers comes a wealth of new information upon which price index calculations can be based. Old problems, such as the appearance and disappearance of goods over time, are likely to be an important feature of such data. However, given that scanner data includes the prices and quantities of the population of transactions we have more information than is traditionally available to deal with the new and disappearing goods problem. We adopt a recently developed approach using the Constant Elasticity of Substitution cost function to provide a detailed empirical analysis of the effects of new and disappearing goods for an Australian scanner data set of supermarket products. Our results indicate that the failure to account for new and disappearing goods in the cost-of-living index leads to a significant upward bias.     

A macroeconomic rationing model of the belgian economy

This paper presents a small macroeconometric model that allows explicitly for the existence of rationing on the goods and labour markets and clearly distinguishes the three well-known regimes: Keynesian unemployment, classical unemployment and repressed inflation. The basic structure of the model contains two equations that can be estimated by single equation techniques. Estimation on Belgian postwar data establishes both the feasibility and the usefulness of the quantity rationing approach. Empirical results also reveal after 1972 an increasing discrepancy between the amount of labour supplied and the potential employment level determined by existing production capacities.     

Die Bedeutung der Lager für die Konjunktur

Summary The aim of this paper is to collect disaggregated data on inventories in Austria. This information is used to study the role of inventory investment in business cycles. It seemed especially interesting to investigate whether entrepreneurs plan a stable inventory-sales ratio and whether inventories of purchased goods, goods in production and goods for sale are influenced by the same factors.It turns out that the aggregate inventory-sales ratio (in current prices) decreased considerably during the past twenty years. This decrease was caused only by different rates of price increases; measured in constant prices, the rate remained almost constant. Inventories exhibit a procyclical behavior, with inventory investment leading and inventory stocks lagging.For industry investment in stocks of purchased goods depends on outstanding orders and on imports, for goods in process on orders, production and on stocks of finished goods (positively). eterminants of finished goods inventories are sales and capacity utilisation (positive sign); entrepreneurs therefore increase their stocks in boom phases and decrease them in times of slower demand. This is exactly the behavior which a previous theoretical paper expected: Inventories don't act as a buffer over the cycle, quite the contrary, inventory planning reinforces economic fluctuations.     

THE PRICE LEVEL, THE QUANTITY THEORY OF MONEY, AND THE FISCAL THEORY OF THE PRICE LEVEL

This paper examines price‐level determination from the perspective of portfolio choice. Arbitrages among money balances, bonds, and investment goods determine their relative demands. Returns to real balance holdings and after‐tax returns to investment goods determine the relative values of nominal and real assets. Because expectations of government policies ultimately determine the expected returns to both nominal and real assets, the price level depends on interactions among current and expected future monetary and fiscal policies. The quantity theory and the fiscal theory emerge as special cases produced by restricting both the margins and the policies considered.     

The demand and supply for investment goods: does the market clear?

Standard theoretical considerations suggest that the quantity and price of a good are jointly determined by supply and demand. In the literature on physical investment, however, attention has been focused almost exclusively on the demand side. This paper considers the theoretical and statistical problems that arise when the demand and supply sides of the market for investment goods are estimated simultaneously. One of the important problems is dealing with the possibility that the price may not adjust instantaneously to clear the market.The model is estimated using data from post-war Japan. The two most important results that emerge are: 1) The long-run supply curve of investment goods is virtually horizontal; and 2) The market appears to be characterized by equilibrium.     

NEW MEASURES OF PRICES AND PRODUCTIVITY FOR TRADABLE AND NONTRADABLE GOODS*

Empirical work on the division of real output and prices into tradable and nontradable components has not kept pace with theoretical developments. The conventional proxies of prices and productivity by tradable and nontradable sector are examined and found deficient in several important respects. It is demonstrated that an approach that relies on the long–standing data on gross domestic product by industry of origin can overcome some of these deficiencies. These data are used to construct new annual measures of prices and productivity for tradable and nontradable output for 12 industrial countries over the period 1950–73. While far from precise, the new measures are consistent with the following criteria for distinguishing between tradables and nontradables: the degree of foreign trade participation should be higher for tradables than for nontradables; the degree of international commodity arbitrage, as measured by cross-country correlations of price changes, should be higher for tradables than nontradables; and tradables should be closer substitutes than nontradables for traded goods from other countries (imports). Despite the considerable conceptual advantages of the new measures of prices and productivity over the conventional proxies, correlation analysis indicates that the new and old measures usually move together rather closely in our 12 subject countries. The correlations are higher across the alternative relative productivity measures than for the alternative relative price measures.     

A DYNAMIC MODEL OF TOURISM, EMPLOYMENT AND WELFARE: THE CASE OF HONG KONG

Abstract.  The present paper uses a dynamic open-economy model with wage indexation to examine the impact of tourism on employment and welfare. Both short-run and long-run situations are analysed. It is well known that tourism converts non-traded goods into tradable goods. An increase in the demand for a non-traded good raises its relative price, which results in an expansion of the non-traded sector at the expense of the traded goods sector. This output shift raises labour employment in the short run. However, in the long run, the higher relative price leads to higher wages, resulting in a negative impact on labour employment. If the output effect is dominant, the expansion in tourism raises employment and welfare. However, under realistic conditions tourism may lower both labour employment and welfare due to rising costs. These results are demonstrated by simulating a dynamic model for the case of Hong Kong.     

Did the cost of living in Canada increase faster for the rich during the period 1950–1980?

The paper computes the approximate true cost of living indexes from the time series data on price and quantity of nine broadly defined goods and services to show that the cost of living increased faster for the rich in Canada during the three decades. This is due mainly to an increase in the prices of “luxury” goods and services relative to “necessity” goods and services. These conclusions are almost identical to those of several other studies which utilize a different framework and a different time period for analysis.     

PRICE ANALYSIS AND A SYSTEM OF PRICE STATISTICS

For some considerable time the interest in price statistics has mainly been focused on their use as "intermediate goods". The requirements of a system of price index numbers which have to be established in this connection are largely in the field of statistical coordination (integration of statistics on quantities, values and prices).
Recently the inflation problem has given rise to an increased interest in price statistics as "final goods". A meaningful analysis of inflation will devote attention to the relation between input prices and output prices. In this article several versions of an analysis of prices of final demand categories based on an ordinary Leontief input-output scheme are presented and the needs for price statistics are discussed. In fact a self-contained system of price statistics emerges from the price analysis.
There is a difference in the nature of the price index numbers required in compiling input-output tables in constant prices (Paasche) and that in the case of price analysis (Laspeyres). However the need for price observation runs largely parallel because in both cases the same detailed information on price developments will probably be used.
Price analysis gives the possibility of a step-by-step approach in building up a system of price index numbers.     

Can Weak Substitution be Rehabilitated?

This paper develops a graphical analysis and an analytical model that demonstrate how weak substitution can be used for non-market valuation. Weak complementarity and weak substitution represent preference restrictions that allow us to develop equivalent price changes to describe quantity or quality changes in non-market goods. The price changes are Hicksian equivalents in that they yield the same utility changes as would the quantity or quality changes. After discussion of several potential applications of weak substitution, the paper develops the parallel between the restriction and recent strategies from modeling differentiated goods.     

THE TREATMENT OF “HOME OWNERSHIP” IN THE CPI*

This paper explores the imputed service price approach to the pricing of the services of consumer-owned-and-used durables in the construction of the consumer price index, using the services of owner-occupied housing as an illustration. A theoretical framework for analyzing this question is first developed. Certain practical problems are then discussed. The conceptual difficulty of constructing an appropriate rate of return on the basis of available data on interest rates and house prices, in the context of inflation, is explored. Two arguments are advanced that statistical agencies ought not to follow the imputed service price approach in pricing the services of owner-occupied dwellings and other consumer durables. On the one hand, nominal interest rates will, in any short period, reflect monetary policy and not any change in the money “rental” of owner-occupied houses. Second, movements in nominal interest rates will also reflect changes in the money price of pure consumption goods, as well as changes in the money price of houses. The argument is extended to other consumer durables and, in the limiting case, to monetary balances, and it is concluded that in all but trivial cases the application of the service price approach leads to price movements of little or no meaning.     

Chained,exact and superlative hedonic price changes: estimates from microdata

Scanner data are used to calculate chained, exact (and superlative) hedonic price indexes for television sets. The data source is available for a wide range of goods, the application providing an example of how this method can be more widely applied. The indexes correspond to constant utility, hedonic cost-of-living indexes. The approach improves on the existing direct method, which takes its estimates directly from the coefficients on time dummies in a hedonic regression. It also improves on the matched model method used by statistical agencies. The differences between actual price changes and exact hedonic quality-adjusted price changes are found to be substantial. Base-period and current-period weighted exact hedonic indexes are similar, thus providing good approximations to a superlative index. Estimates from the direct, dummy variable approach were compared to the superlative indexes. The disparities between the results argue for caution in the use of the direct, dummy variable approach to estimating quality-adjusted price changes.     

THE INTERNATIONAL COMPARISONS OF CONSUMPTION LEVEL CARRIED OUT BY THE POLISH CENTRAL STATISTICAL OFFICE

1. The problems presented have arisen in practice when carrying out international comparisons of national income and its elements between the CMEA countries. Some rough conclusions are drawn from the nearly completed comparison of consumption level between Poland and Austria. 2. The basic methodological principles of the comparison were similar to the methods used by the group of economists directed by Milton Gilbert and Irving Kravis in their comparison relating to Western European countries. However, a number of new problems have emerged in the course of our work which required practical and theoretical solutions. Some differences in theoretical approach between the Gilbert-Kravis study and ours are discussed. Gilbert and Kravis based their comparison as far as possible on average prices of commodity groups or quantity data, and price indexes for representative goods were applied only as a practical necessity. On the contrary in our study we based our calculation mainly on representative goods and their price relation as this method, in our opinion, takes into account quality differences, which escape from the picture in the Gilbert-Kravis method. 3. Some special theoretical and practical problems of comparisons between countries having market economies and those with planned economies are presented in terms of the example of the comparison of consumption levels between Austria and Poland. Three groups of questions are pointed out: (1) the problem of the definition and boundaries of the aggregates compared; (2) the problem of differences in pricing in the groups of products and services compared, resulting from the social policy of the government concerned; and (3) the problem of differences arising from general price policies in the countries compared. 4. At the end of the paper it is suggested that it would be useful to work out a “statistical information system”, which would make possible detailed comparisons of the volume of consumption among several countries and groups of countries without the need of conducting direct comparisons between each pair of countries.     

PRICES OF SLAVES IN WEST AND WEST-CENTRAL AFRICA: TOWARD AN ANNUAL SERIES, 1698–1807

Currently available price series for slaves during the eighteenth century need to be treated with much caution, and it seems unlikely that large quantities of new evidence will be unearthed. Further progress toward the creation of more reliable price series will thus require new methods of estimation. In this paper, a new price series for slaves at the African coast is calculated using data relating to the number of slaves shipped from the coast by British traders and the value of trade goods bartered for them.     

Prices versus quantities in the presence of a second,unpriced, externality

This paper analyzes whether the presence of a second unregulated externality influences the choice between a price and a quantity instrument to address an externality. The author studies a situation in which two goods jointly generate an externality but only one of them is regulated. The two instruments differ because of the presence of uncertainty regarding the private value of the two goods. To ignore the unregulated good and apply Weitzman's classical result on the comparison of the slopes of marginal benefit and cost could be misleading because of the randomness of the unregulated good's quantity. Beside the relative slope of the marginal damage, the substitutability and the distribution of shocks play a role in the comparison. If there is a “cocktail effect” and the regulated and unregulated goods' quantities are negatively correlated, which occurs if they are substitutes, this reinforces the appeal of a price instrument. Furthermore, if the two goods are weak substitutes with correlated demands, the variance of the quantity of the unregulated good is larger under a quota than a tax, which further reinforces the appeal of the tax instrument.     

The Generalized Unit Value Index Family

This study introduces a group of Generalized Unit Value indices that evaluate price level changes. The approach is to transform the original price and quantity data into numbers that all relate to a common unit which provides the same intrinsic worth to the consumers. When, in the transformed data, an equivalence of worth is present, then even incommensurables can be aggregated by the standard unit value method. The group of Generalized Unit Value indices includes some well‐known (Laspeyres, Paasche, Banerjee), barely known (Lehr, Davies), and previously quite unknown price indices. Using a Generalized Unit Value price index as a deflator yields a particularly appealing and useful quantity index.     

Monopoly and the choice of product characteristics

Monopoly firms producing large, indivisible goods may be able to effect perfect price discrimination by charging an all-or-none implicit price for each product characteristic. In that case, a monopolist will provide the same vector of product characteristics (i.e., the same product ‘quality’) as will a competitive industry; and, perhaps more surprisingly, produce the same quantity of the good. With all-or-none pricing, monopoly power leads to a higher product price, but no change in product quality or output.     

NATIONAL PRODUCT AT CONSTANT PRICES IN THE FEDERAL REPUBLIC OF GERMANY

With few exceptions, only cormmodity flows and values which can be determined by means of commodity flows (flows of goods and services) are calculated in constant prices in the official national accounts of the Federal Republic of Germany. Figures an the industrial origin and the final use of the national product are published, the former according to thirty industries, the latter according to the major types of uses of which in particular private consumption expenditure has been further analysed. The computations at constant prices are based on market prices and not on factor costs. It is only on this basis that a uniform valuation of the production and the expenditure side can be made since the turnover tax, which is the most important indirect tax, is contained in the elements of final demand in varying shares and cannot be eliminated (the tax is part of the price and has cumulative effect). The computation at constant prices presupposes a breakdown of the values in current prices according to quantities and prices. This raises a number of problems, e.g. because seller and buyer may consider differing aspects-production costs, technical attributes, etc., on the one hand, and use etc., on the other hand. In part there exist only vague ideas, or no ideas at all, as to what is to be considered-from a theoretical point of view-as quantity and price. In other cases the two values can only with great difficulties, if at all, be quantified, or there exists no market price and only the production costs are available. The author deals in greater detail with differences in quality and new commodities, the determination and treatment of quantities and prices for services, in particular for trade services (services attached to goods), the computation of government services at constant prices considering the development of productivity in public service, the determination of the values calculated as balances, above all the treatment of changes in the terms of trade for net exports of goods and services, the computation of the contributions of industries to the gross domestic product and, finally, the reconciliation of the production and the expenditure side. In a third section the author deals with index formulae and the base year. In the majority of cases values are deflated; partly, however, they are currently adjusted by means of volume and quantity data. On the production side the two methods are in part combined. In a concluding section a survey is provided of the computation methods used in the Federal Republic of Germany and on the available material for the computations. Mention is made of depreciation at constant prices.     

ON GOODS AND SERVICES

The paper is concerned with the concept, definition and measurement of a service. Although services are often dismissed as immaterial goods, they are not special kinds of goods and belong in a quite different logical category from goods. The search for appropriate units of quantity in which to measure services is not an idle metaphysical pursuit. Without quantity units there can be no prices, and most economic theory becomes irrelevant. Indeed, large parts of economic theory may be irrelevant to the analysis of services anyway, precisely because they are not goods which can be exchanged among economic units. Services are as important as goods in modern developed economies and they need to be identified and quantified properly if the measurement of economic growth and inflation is to have any meaning for the economy as a whole. The concept of a service is explained in some detail in the paper, and various ways in which services can be classified for purposes of economic analysis are elaborated. The distinction between private and public goods, or rather between private and collective services, is re-examined in the light of the general concept of a service proposed in the paper. Externalities are shown to be simply special kinds of services.     

Comparing Horizontal Mergers Under Cournot with Bertrand Competitions

Taking the product substitutability into account, this paper considers the horizontal mergers under Cournot with Bertrand competition. Firstly, the big market size indicates non‐intention to merge. Secondly, independent goods indicate indifferences between the quantity competition and price competition. Finally, firms under quantity competition are more willing to merge than under price competition. The antitrust authority is more inclined to approve the merger under quantity competition than that under price competition.