Measuring American rents: a revisionist history.
Until the end of 1977, the method used to measure changes in rent of primary residence in the U.S. consumer price index (CPI) tended to omit price changes when units changed tenants or were temporarily vacant. Since such units typically had more rapid increases in rents than average units, omitting them biased inflation estimates downward. Beginning in 1978, the Bureau of Labor Statistics (BLS) implemented a series of methodological changes that reduced this bias. The authors use data from the American Housing Survey to check the success of the corrections. They compare estimates of the ...
The CPI for rents: a case of understated inflation
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 ...
Optimal bank closure for deposit insurers
Intangible assets and national income accounting
In this paper I focus on three related and difficult areas of the measurement of national income. I argue that the economic theory underlying measurement of these items is currently controversial and incomplete.
The retail revolution and food-price mismeasurement
If a product sells for $3 this week at the local supermarket and $2 next week, what is the "real" price? What if that same product has a different price at a different store? Thanks to scanner technology, food prices differ a lot these days because they can be changed quickly and easily. How do our official statistics take these price movements into account? Not too well, according to Leonard Nakamura. In this article, he describes the retail revolution of recent years and how it has led to mismeasurement of food prices
Measuring inflation in a high-tech age
“Free” Internet Content: Web 1.0, Web 2.0, and the Sources of Economic Growth
The Internet has evolved from Web 1.0, with static web pages and limited interactivity, to Web 2.0, with dynamic content that relies on user engagement. This change increased production costs significantly, but the price charged for Internet content has generally remained the same: zero. Because no transaction records the ?purchase? of this content, its value is not reflected in measured growth and productivity. To capture the contribution of the ?free? Internet, we model the provision of ?free? content as a barter transaction between the content users and the content creators, and we value ...
Underestimating advertising: innovation and unpriced entertainment
Leonard Nakamura states that despite consumers? lack of respect for advertising, it nonetheless plays a significant role in the economy. For one thing, it helps consumers find out about new products, and new products have been rising in economic importance. It also plays a role in subsidizing broadcast entertainment and news programs. Ultimately, Nakamura shows that although advertising contributes to consumer welfare, its contribution is missing from our measures of output.
Investing in intangibles: is a trillion dollars missing from the GDP?
Leonard Nakamura examines this paradox of low savings accompanied by increased wealth.