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  4. April 2019
  5. Product Turnover and the Cost-of-Living Index: Quality versus Fashion Effects

Product Turnover and the Cost-of-Living Index: Quality versus Fashion Effects

  • Kozo Ueda
  • Kota Watanabe
  • Tsutomu Watanabe
American Economic Journal: Macroeconomics
vol. 11, no. 2, April 2019
(pp. 310-47)
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Abstract

This paper evaluates the effects of product turnover on a welfare-based cost-of-living index by incorporating the quality effect and the fashion effect. Employing scanner data for Japan for the years 1988–2013, we find that (i) the price and quantity of a new product tend to be higher than those of its predecessor at its exit; (ii) a considerable fashion effect exists for the entire sample period, while the quality effect is declining over time; and (iii) the discrepancy between the cost-of-living index estimated based on our methodology and the price index constructed only from a matched sample is not large.

Citation

Ueda, Kozo, Kota Watanabe, and Tsutomu Watanabe. 2019. "Product Turnover and the Cost-of-Living Index: Quality versus Fashion Effects." American Economic Journal: Macroeconomics, 11 (2): 310-47. DOI: 10.1257/mac.20160403

Additional Materials

JEL Classification

  • C43 Index Numbers and Aggregation; Leading indicators
  • E31 Price Level; Inflation; Deflation
  • L11 Production, Pricing, and Market Structure; Size Distribution of Firms
  • L15 Information and Product Quality; Standardization and Compatibility
  • L81 Retail and Wholesale Trade; e-Commerce
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