Scanner data, time aggregation and the construction of price indexes

We examine the impact of time aggregation on price change estimates for 19 supermarket item categories using scanner data. Time aggregation choices lead to a difference in price change estimates for chained indexes which ranged from 0.28% to 29.73% for a superlative index and an incredible 14.88%-46,463.71% for a non-superlative index. Traditional index number theory appears to break down with weekly data, even for superlative indexes. Monthly and (in some cases) quarterly time aggregation were insufficient to eliminate downward drift in superlative indexes. To eliminate drift, a novel adaptation of a multilateral index number method is proposed.     

The housing bubble and a new approach to accounting for housing in a CPI

Over the course of the recent house price bubble in the United States, the price of homes rose rapidly from 1999 Q4 to 2005 Q4 (11.3% annually as measured by the Case-Shiller index, and 8.4% annually as measured by the Federal Housing Financing Agency) but slowly as measured by owner equivalent rents (3.4%), so measured core inflation remained relatively docile during this period, since only rents are used to measure inflation for housing services in the United States. Over the last several decades, the US Bureau of Labor Statistics (BLS) has experimented with both rental equivalence and user cost approaches for accounting for owner occupied housing (OOH) services in the CPI. We explain the basics of these approaches, and outline the BLS experiences with using them. This assessment leads us to conclude that the time has come to try a new approach: the opportunity cost approach. We argue this approach has advantages over both the conventional rental equivalence and user cost approaches, though it embeds components of the measures for both those approaches and builds solidly on the research of Verbrugge and others at the BLS. Also, we take up empirical issues that must be faced regardless of which of the approaches discussed is adopted. We explain how the repeat-sales and various hedonic regression methods can be placed in a common framework, thereby facilitating understanding of the properties of and the tradeoffs between the methods. We also consider measurement complications that arise because the land and structure components of properties depreciate at different rates.     

Alternative Approaches to Commercial Property Price Indexes for Tokyo

The paper studies the problems associated with the construction of price indexes for commercial properties that could be used in the System of National Accounts. Property price indexes are required for the stocks of commercial properties in the balance sheets and related price indexes for the land and structure components of a commercial property are required in the balance sheet accounts for the calculation of the Multifactor Productivity of the Commercial Property Industry. The paper uses a variant of the builder's model that has been used to construct Residential Property Price Indexes. Geometric depreciation rates are estimated for commercial offices in Tokyo using assessment data for REIT. The problems associated with the decomposition of property value into land and structure components are addressed. The problems associated with depreciating capital expenditures on buildings and with measuring the loss of asset value due to early retirement of the structure are also addressed.     

COMMERCIAL PROPERTY PRICE INDEXES AND THE SYSTEM OF NATIONAL ACCOUNTS

This paper studies the problems associated with the construction of price indexes for commercial properties that could be used in the System of National Accounts (SNA). Property price indexes are required for the stocks of commercial properties in the Balance Sheets of the country. Related service price indexes for the land and structure input components of a commercial property are required in the Production Accounts of the country if the Multifactor Productivity of the Commercial Property Industry is calculated as part of the SNA. The paper reviews existing methods for constructing an overall Commercial Property Price Index (CPPI) and concludes that most methods are biased (due to their neglect of depreciation) and more importantly, not able to provide separate land and structure subindexes. A class of hedonic regression models that is not subject to these problems is discussed.     

The duality implications of a concave aggregator function

Suppose a production or utility function F is continuous, increasing and quasiconcave on the non-negative orthant. Let C be the associated cost function, G the associated indirect function, and D the associated distance or deflation function. The implications of the concavity of F on the other three dual representations are exhibited.     

Estimation of R&D depreciation rates: a suggested methodology and preliminary application

Abstract The 2008 version of the SNA has recommended capitalization of R&D expenditures. To implement this recommendation, we need to determine the depreciation rate of R&D capital. In this paper, we develop a simple model, based on a production function method that allows for monopolistic competition, to estimate the annual depreciation rate of R&D capital. We treat R&D capital as a technology shifter instead of as an explicit input factor. Both the R&D stock and the time variable are used to capture technological progress. Estimated R&D depreciation rates and markup factors are presented for the U.S. manufacturing sector and four U.S. knowledge‐intensive industries.     

Returns to scale: concept,estimation and analysis of Japan's turbulent 1964–88 economy

Abstract There is policy interest in factoring productivity growth into technical progress and returns to scale components. Our approach uses exact index number methods to reduce the parameters that must be estimated, and allows us to exploit the cross‐sectional dimension of plant‐level panel data. We show that the same equation can also be used to estimate ‘Harberger’ scale economies and technical progress indicators that require fewer assumptions. Estimates of the elasticity of scale for Japanese establishments in three major industries over 1964–88 are presented. Our study spans the high growth era of the 1960s, two oil shocks, and other exogenous shocks.     

Incentive Indexes for Regulated Industries

A range of performance measures are suggested and evaluated in the context of regulated industries with multiple inputs and/or multiple outputs. These measures are intended to induce optimizing behavior, i.e., to induce unit cost minimization or productivity growth maximization. Intertemporal and practical implementation issues are also considered.