MEASURING AGGREGATE PRICE INDICES WITH TASTE SHOCKS: THEORY AND EVIDENCE FOR CES PREFERENCES

• 成果类型: Article
• 署名作者: Redding, Stephen J.; Weinstein, David E.
• 署名单位: Princeton University; National Bureau of Economic Research; Centre for Economic Policy Research - UK; Columbia University
• 刊物名称: QUARTERLY JOURNAL OF ECONOMICS
• ISSN/ISSBN: 0033-5533
• DOI: 10.1093/qje/qjz031
• 发表日期: 2020
• 页码: 503-560
• 关键词: models; TRADE; patterns; welfare; numbers; gains

摘要

We develop an approach to measuring the cost of living for CES preferences that treats demand shocks as taste shocks that are equivalent to price shocks. In the presence of relative taste shocks, the Sato-Vartia price index is upward biased because an increase in the relative consumer taste for a variety lowers its taste-adjusted price and raises its expenditure share. By failing to allow for this association, the Sato-Vartia index underweights drops in taste-adjusted prices and overweights increases in taste-adjusted prices, leading to what we call a tasteshock bias. We show that this bias generalizes to other invertible demand systems.