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Elementary Index Bias: Evidence for the Euro Area from a Large Scanner Dataset

  • Enikő Gábor-Tóth and Philip Vermeulen
Published/Copyright: December 7, 2019
German Economic Review
From the journal German Economic Review Volume 20 Issue 4

Abstract

We provide evidence on the effect of elementary index choice on inflation measurement in the euro area. Using scanner data for 15,844 individual items from 42 product categories and 10 euro area countries, we compute product category level elementary price indexes using eight different elementary index formulas. Measured inflation outcomes of the different index formulas are compared with the Fisher ideal index to quantify elementary index bias. We have three main findings. First, elementary index bias is quite variable across product categories, countries and index formulas. Second, a comparison of elementary index formulas with and without expenditure weights shows that a shift from price only indexes to expenditure weighted indexes would entail at the product level multiple percentage points differences in measured price changes. And finally, we show that elementary index bias is quantitatively more important than upper level substitution bias.

Keywords: harmonised index of consumer prices; inflation measurement bias; elementary index; lower level substitution bias
Published Online: 2019-12-07
Published in Print: 2019-12-01

© 2019 by Walter de Gruyter Berlin/Boston

Articles in the same Issue

  1. Public Preferences for Government Spending Priorities: Survey Evidence from Germany
  2. Structural Changes in the Labor Market and the Rise of Early Retirement in France and Germany
  3. Tax Composition and Growth: A Broad Cross-country Perspective
  4. Sharing the Burden? Empirical Evidence on Corporate Tax Incidence
  5. Wage Performance of Immigrants in Germany
  6. New Evidence on the Effects of the Shortened School Duration in the German States: An Evaluation of Post-secondary Education Decisions
  7. Should Forecasters Use Real-Time Data to Evaluate Leading Indicator Models for GDP Prediction? German Evidence
  8. Worker Personality: Another Skill Bias beyond Education in the Digital Age
  9. Changes in Occupational Tasks and Their Association with Individual Wages and Occupational Mobility
  10. Is There a Glass Ceiling over Germany?
  11. Thoughts on a Fiscal Union in EMU
  12. Analyzing the Efficiency of County Road Production – Evidence from Eastern German Counties
  13. Interregional Migration of Human Capital and Unemployment Dynamics: Evidence from Italian Provinces
  14. Predatory Short Sales and Bailouts
  15. Coaching, Counseling, Case-Working: Do They Help the Older Unemployed Out of Benefit Receipt and Back Into the Labor Market?
  16. The Productivity Effects of Worker Mobility Between Heterogeneous Firms
  17. A Synthetic Control Assessment of the Green Paradox: The Role of Climate Action Plans
  18. Where Does the Good Shepherd Go? Civic Virtue and Sorting into Public Sector Employment
  19. Cyber Technology and the Arms Race
  20. Elementary Index Bias: Evidence for the Euro Area from a Large Scanner Dataset
  21. Conservative Politicians and Voting on Same-sex Marriage
  22. A Novel Housing Price Misalignment Indicator for Germany
  23. Epstein–Zin Utility, Asset Prices, and the Business Cycle Revisited
  24. Management Practices and Productivity in Germany
  25. Take Your Time to Grow: A Field Experiment on the Hiring of Youths
  26. Codetermination, Price Competition and the Network Industry
  27. Let the Data Speak? On the Importance of Theory-Based Instrumental Variable Estimations
  28. The Inherited Inequality: How Demographic Aging and Pension Reforms can Change the Intergenerational Transmission of Wealth
  29. Competing for Good Immigrants
  30. Regional Impact of the German Rent Brake
  31. Optimal Social Insurance and Health Inequality
  32. Goal Setting, Information, and Goal Revision: A Field Experiment
  33. State-Dependent Forward Guidance and the Problem of Inconsistent Announcements
  34. Capital adjustment cost and inconsistency in income-based dynamic panel models with fixed effects
  35. In Search of an Appropriate Lower Bound. The Zero Lower Bound vs. the Positive Lower Bound under Discretion and Commitment
  36. The Impact of Direct Cash Payments on Whole Blood Supply
  37. Issue Information
  38. Output Growth Decomposition in the Presence of Input Quality Effects: A Stochastic Frontier Approach
  39. Accounting for Sustainable Development over the Long-Run: Lessons from Germany
  40. Changes in US Monetary Policy and Its Transmission over the Last Century
  41. Why Did Income Inequality in Germany Not Increase Further After 2005?
  42. Acknowledgements
  43. Index
https://doi.org/10.1111/geer.12182
Keywords for this article
harmonised index of consumer prices; inflation measurement bias; elementary index; lower level substitution bias

Articles in the same Issue

  1. Public Preferences for Government Spending Priorities: Survey Evidence from Germany
  2. Structural Changes in the Labor Market and the Rise of Early Retirement in France and Germany
  3. Tax Composition and Growth: A Broad Cross-country Perspective
  4. Sharing the Burden? Empirical Evidence on Corporate Tax Incidence
  5. Wage Performance of Immigrants in Germany
  6. New Evidence on the Effects of the Shortened School Duration in the German States: An Evaluation of Post-secondary Education Decisions
  7. Should Forecasters Use Real-Time Data to Evaluate Leading Indicator Models for GDP Prediction? German Evidence
  8. Worker Personality: Another Skill Bias beyond Education in the Digital Age
  9. Changes in Occupational Tasks and Their Association with Individual Wages and Occupational Mobility
  10. Is There a Glass Ceiling over Germany?
  11. Thoughts on a Fiscal Union in EMU
  12. Analyzing the Efficiency of County Road Production – Evidence from Eastern German Counties
  13. Interregional Migration of Human Capital and Unemployment Dynamics: Evidence from Italian Provinces
  14. Predatory Short Sales and Bailouts
  15. Coaching, Counseling, Case-Working: Do They Help the Older Unemployed Out of Benefit Receipt and Back Into the Labor Market?
  16. The Productivity Effects of Worker Mobility Between Heterogeneous Firms
  17. A Synthetic Control Assessment of the Green Paradox: The Role of Climate Action Plans
  18. Where Does the Good Shepherd Go? Civic Virtue and Sorting into Public Sector Employment
  19. Cyber Technology and the Arms Race
  20. Elementary Index Bias: Evidence for the Euro Area from a Large Scanner Dataset
  21. Conservative Politicians and Voting on Same-sex Marriage
  22. A Novel Housing Price Misalignment Indicator for Germany
  23. Epstein–Zin Utility, Asset Prices, and the Business Cycle Revisited
  24. Management Practices and Productivity in Germany
  25. Take Your Time to Grow: A Field Experiment on the Hiring of Youths
  26. Codetermination, Price Competition and the Network Industry
  27. Let the Data Speak? On the Importance of Theory-Based Instrumental Variable Estimations
  28. The Inherited Inequality: How Demographic Aging and Pension Reforms can Change the Intergenerational Transmission of Wealth
  29. Competing for Good Immigrants
  30. Regional Impact of the German Rent Brake
  31. Optimal Social Insurance and Health Inequality
  32. Goal Setting, Information, and Goal Revision: A Field Experiment
  33. State-Dependent Forward Guidance and the Problem of Inconsistent Announcements
  34. Capital adjustment cost and inconsistency in income-based dynamic panel models with fixed effects
  35. In Search of an Appropriate Lower Bound. The Zero Lower Bound vs. the Positive Lower Bound under Discretion and Commitment
  36. The Impact of Direct Cash Payments on Whole Blood Supply
  37. Issue Information
  38. Output Growth Decomposition in the Presence of Input Quality Effects: A Stochastic Frontier Approach
  39. Accounting for Sustainable Development over the Long-Run: Lessons from Germany
  40. Changes in US Monetary Policy and Its Transmission over the Last Century
  41. Why Did Income Inequality in Germany Not Increase Further After 2005?
  42. Acknowledgements
  43. Index
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