Hedonic prices indexes for new passenger cars in Portugal (1997–2001)

This paper evaluates the effects of quality change on the price index for new passenger cars in Portugal for the years 1997–2001. Hedonic regression models are studied, giving particular emphasis to the relation between the form of the price index and the econometric techniques used for inference. T...

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Bibliographic Details
Published in:Economic modelling 2006-12, Vol.23 (6), p.890-908
Main Authors: Reis, Hugo J., Santos Silva, J.M.C.
Format: Article
Language:English
Subjects:
Automobiles
Consumer Price Index
CPI bias
Econometrics
Industry
Parameter stability
Portugal
Price level
Product quality
Regression analysis
Studies
Vehicles
Weighted least squares
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Summary:This paper evaluates the effects of quality change on the price index for new passenger cars in Portugal for the years 1997–2001. Hedonic regression models are studied, giving particular emphasis to the relation between the form of the price index and the econometric techniques used for inference. The results of the empirical part of the paper indicate that during this period the changes in the quality of new cars sold in Portugal are responsible for price increases averaging 4.8% per year. Because this quality change was not entirely taken into account, in recent years the CPI component corresponding to the sales of new passenger cars may have been overestimated by as much as 2.2 percentage points per year. This corresponds to an overestimation of the overall CPI by about 0.15 percentage points per year.
ISSN:0264-9993
1873-6122
DOI:10.1016/j.econmod.2006.04.003