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Federal Reserve Bank of Philadelphia
Working Papers
Rents have been rising, not falling, in the postwar period
Bridget Cronin
Leonard I. Nakamura
Richard Voith
Abstract

Until the end of 1977, the U.S. consumer price index for rents tended to omit rent increases when units had a change of tenants or were vacant, biasing inflation estimates downward. Beginning in 1978, the Bureau of Labor Statistics (BLS) implemented a series of methodological changes that reduced this nonresponse bias, but substantial bias remained until 1985. The authors set up a model of nonresponse bias, parameterize it, and test it using a BLS microdata set for rents. From 1940 to 1985, the official BLS CPI-W price index for tenant rents rose 3.6 percent annually; the authors argue that it should have risen 5.0 percent annually. Rents in 1940 should be only half as much as their official relative price; this has important consequences for historical measures of rent-house-price ratios and for the growth of real consumption. (Revision forthcoming in Review of Economics and Statistics.)


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Bridget Cronin & Leonard I. Nakamura & Richard Voith, Rents have been rising, not falling, in the postwar period, Federal Reserve Bank of Philadelphia, Working Papers 08-28, 2008.
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Keywords: Rent
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