Search

The problem of accurately measuring inflation in the face of constant improvement in the quality of goods is a long-standing one in economics. This paper uses a novel dataset on the prices of the travel guidebooks published by the German publishing house Baedeker between 1832 and 1944 to construct a hedonic price index for guidebooks. Comparing these indexes to the list prices of these guidebooks, we show that the failure to adjust for improvements in the quality of the guidebooks over time imparts a substantial upward bias to measured inflation. For example, for German-language guidebooks, nominal prices increased 76 percentage points more than quality-adjusted prices between 1843-1913, suggesting an average upward bias over this period of 1.1 percentage points a year. Similarly, we find substantial average upwards bias of 1.5 and 1.7 percentage points a year for French-language guidebooks over 1859-1913 and English-language guidebooks over 1868-1913, respectively. [ABSTRACT FROM AUTHOR]

Using a new dataset, we document a systematic pattern in the demographic characteristics of car buyers over the model year: as vehicle prices fall over the model year, so do buyer incomes. This pattern is consistent with price-insensitive buyers purchasing early in the year, while others waiting until prices decline, and suggests price skimming (i.e. intertemporal price discrimination). Such consumer heterogeneity over the model year raises questions for measuring quality improvements in new goods. [ABSTRACT FROM AUTHOR]