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Introduction What are the Issues?

Introduction What are the Issues?

(p.1) Introduction What are the Issues?
Price Index Concepts and Measurement
W. Erwin Diewert, John Greenlees, Charles Hulten
University of Chicago Press

The role of the methodological foundation for a Consumer Price Index (CPI) has been examined and advocated in two previous reviews of the CPI: the 1961 Stigler Report2 and the 1996 Boskin Report. The role of the Cost-of-Living Index (COLI) concept and its relation to fixed-weight indexes has been central to the debate over the CPI for more than four decades. The COLI approach to CPI index construction is superior to either the Cost-of-Goods Index or test approaches, but it is noted that the test approach can be useful on occasion as a supplement to the economic approach to index construction. In the Boskin Report, issues in quality adjustment played a prominent role because the Boskin Commission attributed much of their estimated upward bias in the CPI to the index's failure to adequately deal with improvements in product quality over time.

Keywords:   Cost of Living, COLI, Consumer Price Index, CPI, Boskin Report, product quality

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