Quality adjusted prices: Hedonic methods and implications for national accounts

Abstract

Rapid technological progress in recent years has exacerbated the problems that arise in measuring price changes and, consequently, economic magnitudes at constant prices when changes in the quality of products occur. A natural means of tackling these measurement problems is to use hedonic price indices. This survey focuses on the use of hedonic methodology and its implications for the construction of deflators for significant National Accounts aggregates. It thus describes what hedonic methodology involves and analyses the various hedonic studies existing in the literature and the use made of hedonic methodology by different public statistics offices in the computers and related equipment, cars, and housing sectors. Finally, the implications of the use of these hedonic techniques for the estimation in real terms of macroeconomic magnitudes are reviewed.

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