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American Economic Review: Vol. 91 No. 4 (September 2001)

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Quantifying Quality Growth

Article Citation

Bils, Mark, and Peter J. Klenow. 2001. "Quantifying Quality Growth." American Economic Review, 91(4): 1006-1030.

DOI: 10.1257/aer.91.4.1006

Abstract

Using U.S. Consumer Expenditure Surveys, we estimate "quality Engel curves" for 66 durable goods based on the extent richer households pay more for each good. The same data show that the average price paid rises faster from 1980 to 1996 for goods with steeper quality Engel curves, as if households are ascending these curves. BLS prices likewise increase more quickly for goods with steeper quality Engel curves, suggesting the BLS does not fully net out the impact of quality upgrading. We estimate that annual quality growth averages 3.7 percent for our goods, with 2.2 percent showing up as higher inflation.

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Authors

Bils, Mark (U Rochester)
Klenow, Peter J. (Federal Reserve Bank of Minneapolis)

JEL Classifications

D12: Consumer Economics: Empirical Analysis
L62: Automobiles; Other Transportation Equipment
L63: Microelectronics; Computers; Communications Equipment
L68: Appliances; Other Consumer Durables
E31: Price Level; Inflation; Deflation


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