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

Product Turnover and the Cost-of-Living Index: Quality versus Fashion Effects† AbstractThis 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. (JEL C43, E31, L11, L15, L81) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal: Macroeconomics American Economic Association

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

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Publisher
American Economic Association
Copyright
Copyright © 2019 © American Economic Association
ISSN
1945-7715
DOI
10.1257/mac.20160403
Publisher site
See Article on Publisher Site

Abstract

AbstractThis 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. (JEL C43, E31, L11, L15, L81)

Journal

American Economic Journal: MacroeconomicsAmerican Economic Association

Published: Apr 1, 2019

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