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Consumption of Own Production and Cost-of-Living Indexes

Consumption of Own Production and Cost-of-Living Indexes

(p.429) 11 Consumption of Own Production and Cost-of-Living Indexes
Price Index Concepts and Measurement
T. Peter Hill
University of Chicago Press

This chapter discusses one of the aspects of the Consumer Price Index (CPI) scope problem: the implications of expanding coverage of the CPI to include nonmarket household production. The author observes that a major problem with the traditional theory of the CPI is that households do not directly consume most of the goods and services recorded under consumer expenditures. Meals prepared at home are a case in point. The household purchases groceries and combines them with household labor and capital to produce the meals on the table. The chapter signifies that, by implication, the CPI is not an index of the cost of consumption (the usual interpretation), but is instead largely a price index of the intermediate goods used by households to produce consumption goods. It is also observed that the inclusion of household production in the CPI will lead to many imputations in the resulting index.

Keywords:   Consumer Price Index, CPI, households, meals, labor, consumer expenditures

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