Journal of Official Statistics, Vol.27, No.4, 2011. pp. 553–567
An Index Number Formula Problem: The Aggregation of Broadly Comparable Items
Abstract:Index number theory informs us that if data on matched prices and quantities are available, a superlative index number formula is best to aggregate heterogeneous items, and a unit value index is best to aggregate homogeneous ones. The formulas can give very different results. Neglected is the practical case of broadly comparable items. This article provides a formal analysis as to why such formulas differ and proposes a solution to this index number problem.
Keywords:Unit value index, superlative index, Consumer Price Index (CPI), Producer Price Index (PPI), hedonic regression, index numbers, price dispersion
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