NDLI: Causes and Consequences of Bias in the Consumer Price Index as a Measure of the Cost of Living

Content Provider	Springer Nature Link
Author	Boskin, Michael J.
Copyright Year	2005
Abstract	The accurate measure of prices is fundamental to almost every important issue in economics, from measuring economic progress to the conduct of monetary policy to the indexation of private contracts and public programs and tax rules. This paper reviews the causes of bias in the United States Consumer Price Index (CPI), updates the estimate of such bias (now roughly 0.8 percent per annum) following several improvements by the Bureau of Labor Statistics (BLS), notes the likely far larger substitution bias than previously estimated and calls for a series of priority improvements. Particular attention is called to the over 40 basis point slower growth of the BLS’ C-CPI-U compared to the CPI-U, more than double the early 1990s estimates, which highlights the importance of moving to a formula such as the chained Tornqvist C-CPI that corrects for traditional substitution bias. The implications for mismeasuring the growth of real wages, real median income, and real returns to stocks and bonds are developed, as are the budgetary implications of the overindexing of spending and tax brackets resulting from the overstatement of changes in the cost of living.
Starting Page	1
Ending Page	13
Page Count	13
File Format	PDF
ISSN	01974254
Journal	Atlantic Economic Journal
Volume Number	33
Issue Number	1
e-ISSN	15739678
Language	English
Publisher	Kluwer Academic Publishers
Publisher Date	2005-01-01
Publisher Place	Dordrecht
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access Prices, Business Fluctuations, and Cycles: General International Economics Macroeconomics/Monetary Economics Microeconomics Public Finance & Economics Agricultural Economics
Content Type	Text
Resource Type	Article
Subject	Economics, Econometrics and Finance

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1	Ministry of Education (GoI), Department of Higher Education	Sanctioning Authority	https://www.education.gov.in/ict-initiatives
2	Indian Institute of Technology Kharagpur	Host Institute of the Project: The host institute of the project is responsible for providing infrastructure support and hosting the project	https://www.iitkgp.ac.in
3	National Digital Library of India Office, Indian Institute of Technology Kharagpur	The administrative and infrastructural headquarters of the project	Dr. B. Sutradhar bsutra@ndl.gov.in
4	Project PI / Joint PI	Principal Investigator and Joint Principal Investigators of the project	Dr. B. Sutradhar bsutra@ndl.gov.in Prof. Saswat Chakrabarti will be added soon
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