G2TT
来源类型Discussion paper
规范类型论文
来源IDDP11421
DP11421 A Unified Approach to Estimating Demand and Welfare
Stephen Redding; David Weinstein
发表日期2016-07-30
出版年2016
语种英语
摘要The measurement of price changes, economic welfare, and demand parameters is currently based on three disjoint approaches: macroeconomic models derived from time-invariant utility functions, microeconomic estimation based on time-varying utility (demand) systems, and actual price and real output data constructed using formulas that differ from either approach. The inconsistencies are so deep that the same assumptions that form the foundation of demand-system estimation can be used to prove that standard price indexes are incorrect, and the assumptions underlying standard exact and superlative price indexes invalidate demand-system estimation. In other words, we show that extant micro and macro welfare estimates are biased and inconsistent with each other as well as the data. We develop a unified approach to demand and price measurement that exactly rationalizes observed micro data on prices and expenditure shares while permitting exact aggregation and meaningful macro comparisons of welfare over time. We show that all standard price indexes are special cases of our approach for particular values of the elasticity of substitution, constant preferences for each good, and a constant set of goods. In contrast to these standard index numbers, our approach allows us to compute changes in the cost of living that take into account both changes in the preferences for individual goods and the entry and exit of goods over time. Using barcode data for the U.S. consumer goods industry, we show that allowing for the entry and exit of products, changing preferences for individual goods, and a value for the elasticity of substitution estimated from the data yields substantially different conclusions for changes in the cost of living from standard index numbers.
主题International Trade and Regional Economics
关键词Elasticity of substitution Price index Consumer valuation bias New goods Welfare
URLhttps://cepr.org/publications/dp11421
来源智库Centre for Economic Policy Research (United Kingdom)
资源类型智库出版物
条目标识符http://119.78.100.153/handle/2XGU8XDN/540235
推荐引用方式
GB/T 7714
Stephen Redding,David Weinstein. DP11421 A Unified Approach to Estimating Demand and Welfare. 2016.
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