the demand for food products an analysis of interpurchase times and purchased quantities in this paper we study household purchase behaviour of storable food products an inventory model is developed in which the household chooses an optimal stock level of the product storage of the product is costly there is a fixed cost per purchase occasion and the market price is sometimes discounted because of price promotions we show that the optimal purchase policy is an s s policy the model is used to derive predictions on the correlations between interpurchase times and purchased quantities on the one hand and prices on the other these predictions are empirically verified using consumer panel data

consumer research with big data applications from the food demand survey foods in three separate studies based on data from the food demand survey foods which has been conducted monthly for over three years this paper explores heterogeneity in preference across consumers in traditional demand systems heterogeneity in preferences over time in choice experiments and the tail of the distribution for a particular food consumption pattern vegetarianism results show that elasticities of demand for food at home and food away from home vary widely across different groups of consumers defined by a priori cluster analysis based on demographic and attitudinal variables results from a choice experiment are found to depend on when the experiment was conducted and on the market prices prevailing at the time of the survey given the large sample of consumers observed over time there is sufficient data to demographically characterize a small portion of the population vegetarians using traditional logit models and a machine learning method a classifications tree

cost of living inequality during the great recession using detailed barcode level data we construct income group specific price indices for the period of 2004 to 2010 we find substantial differences across income groups arising mainly during the great recession the annual cost of living inflation of the highest quartile has been on average 0 7 percentage points lower than that of the lowest quartile of the income distribution the difference can be explained by the way consumers adjusted their shopping behavior to mitigate the crisis we find that product quality substitution a margin mostly available to richer households is the main mechanism explaining the differences in cost of living inflation our evidence suggests that not accounting for these differences during economic downturns could lead to significant biases in the calculation of inequality and poverty measures jel classifications d12 e31 e32 we thank fernando alvarez erik hurst anil kashyap robert lucas and joseph vavra for their advice and support the paper benefited from comments and suggestions by many others including bong geun choi jorge l garcia jessie handbury sara moreira roberto robatto adriaan ten kate yike wang chen yeh and seminar participants at the university of chicago iea meeting washington university graduate student conference and the midwest macro meeting contacts david argente dargente uchicago edu munseob lee munseob uchicago edu

price dispersion and price indexes the traditional theory of price index numbers is based on the law of one price but in the real world we frequently observe the existence of an equilibrium price dispersion instead of one price of equilibrium this article discusses the effects of price dispersion on two price indexes the cost of living index and the consumer price index with price dispersion and consumer searching for the lowest price these indexes cannot be interpreted as deterministic indicators but as stochastic indicators and they can be biased if price dispersion is not taken into account a measure for the bias of the consumer price index is proposed and the article ends with an estimation of the bias based on data obtained from the consumer price index calculated for the city of sao paulo brazil from january 1988 through december 2004 the period analysed is very interesting because it exhibits different inflationary environments high levels and high volatility of the rates of inflation with great price dispersion until

price dispersion and seller heterogeneity in retail food markets price dispersion i e a homogeneous product being sold at different prices by different sellers is among the most replicated findings in empirical economics the paper assesses the extent and determinants of spatial price dispersion for 14 perfectly homogeneous food products in more than 400 retailers in a market characterized by the persistence of a large number of relatively small traditional food stores alongside large supermarkets the extent of observed price dispersion is quite high when prices in an urban area where the spatial concentration of sellers is higher are compared with those in smaller towns and rural areas differences in search costs and the potentially higher degree of competition do not yield lower prices other counteracting factors including differences in seller costs and consumer incomes make prices on average higher in the urban area for 11 of the 14 products considered for many but not all the products supermarkets proved to be less expensive than traditional retailers although average savings from food shopping at supermarkets were extremely low finally the results of the study provide evidence that retailers have different pricing strategies and these differences also emerge for supermarkets belonging to the same chain the results presented in the paper suggest that a variety of factors play a role in explaining price dispersion in addition to differences in seller costs the contemporaneous heterogeneity of retailers in terms of services provided and consumers in terms of search costs and preferences makes the emergence of monopolistic competition possible as well as allowing small traditional food retailers to remain in business

advertising effects in complete demand systems a rationale for including advertising in complete demand systems is presented an advertising analogue of the slutsky equation is derived and properties of the expenditure and indirect utility functions characterized empirical estimates of a complete demand system incorporating dynamic advertising effects support neoclassical restrictions we do not reject homogeneity or symmetry at the 1 level this represents surprisingly strong support for neoclassical theory relative to prior parametric studies

sales and collusion in a market with storage sales are a widespread and well known phenomenon documented in several product markets this paper presents a novel rationale for sales that does not rely on consumer heterogeneity or on any form of randomness to explain such periodic price fluctuations the analysis is carried out in the context of a simple repeated price competition model and establishes that firms must periodically reduce prices in order to sustain collusion when goods are storable and the market is large the largest equilibrium profits are characterized at any market size a trade off between the size of the industry and its profits arises sales foster collusion by magnifying the inter temporal links in consumers decisions

price independent welfare prescriptions and population size abstract this note investigates the extension of roberts price independent welfare prescriptions to alternatives in which population size and composition can vary we show that ethically unsatisfactory orderings result suppose that a single person is to be added to a population that is unaffected in utility terms either all such additions must be regarded as bad or some expansions in which the added person s life is not worth living must be ranked as social improvements journal of economic literature classification number d63

making sense of the competitiveness debate the debate over national competitiveness is marked by some basic misperceptions with few exceptions those who use the term have a crude essentially mercantilist view of world trade in which competition among nations is just like competition between corporations not only do the authors and readers of reports on national competitiveness usually not understand comparative advantage they are unaware of the most basic adding up constraints economists however find it hard to believe that seemingly well informed people can really be this naive and assume that there must be more sophisticated ideas lying behind what they say the rationales offered by economists in turn offer false comfort to the would be sophisticates who like the term competitiveness they believe that they have transcended conventional economic theory when the fact is that they have failed to comprehend it in short the actual level of discussion is lower than any of the participants imagines copyright 1996 by oxford university press

discrete equilibrium price dispersion an explicit solution of an equilibrium model with price setting firms and searching customers makes possible a number of comparativestatics predictions about how cost differences among firms search costs of customers and taxes will affect the mean and variance of the distribution of market prices another implication of the model is that a firm s demand depends on the difference between its price and the average price in the market

measuring the cost of shelter for homeowners theoretical and empirical considerations recent economic developments have aroused substantial interest in the treatment in the consumer price index cpi of the cost of shelter for homeowners from december 1977 when the latest version of the cpi was introduced until december 1980 the all items cpi increased at an average annual rate of 11 6 while the homeownership component increased at an average annual rate of 16 2 relative to all of the other goods and services in the cpi the homeownership component has increased by 17 5 over the same time period if the relative price of homeownership had remained constant the growth rate of the cpi would have been reduced to 10 1 the question which has been raised is whether the rapid relative increase in the homeownership component which has had such an important impact on the cpi truly reflects changes in the cost of shelter this question is not only important but difficult encompassing many subsidiary questions and auxiliary issues the purposes of this paper are threefold 1 to outline briefly a conceptual framework for the cpi which leads to a straightforward specification of what the shelter component of the cpi should measure 2 to evaluate the theoretical properties of alternative procedures designed to approximate this measurement objective and 3 present empirical evidence on the operational difficulties involved in pursuing a new approach to shelter cost measurement two main conclusions are reached first on both theoretical and empirical grounds a rental equivalence approach to measuring shelter costs for owner occupants is preferred second an estimated rental equivalence measure has grown more slowly over at least the past six years than the official cpi homeownership component given the way in which the cpi is used to escalate both private and public expenditures these results demonstrate that the choice of measurement technique has important distributional implications

the elasticity of substitution between time and market goods evidence from the great recession we document a change in household shopping behavior during the great recession households purchased more on sale larger sizes and generic products and increased coupon usage and shopping at discount stores we estimate a decline in returns to shopping during the recession therefore the increase in shopping behavior implies a significant decrease in households opportunity cost of time using the estimated cost of time and time use data we estimate a high elasticity of substitution between market expenditure and time spent on nonmarket work we find that households smooth a sizable fraction of consumption by varying their time allocation during recessions

search and consumer theory a consumer faces list prices for commodities but can buy one at a discount discounts vary randomly between sellers the number of quotations sought depends on list prices search costs and wealth this function is homogeneous of degree zero and provided some sufficient conditions are satisfied is increasing in wealth decreasing in search cost independent of the list price of the discounted commodity if indirect utility is multiplicatively separable increasing in the list price if the commodity is a necessity increasing in the list price of substitutes slutsky s equation is generalized to include search

the effect of price dispersion on cost of living indexes single good search models imply that mean preserving increases in the amount of price dispersion reduce expected costs of living of searching consumers yet when many goods are consumed commodity substitution may create a de facto form of fixed sample size search this leads to the paradoxical result that an increase in price dispersion may reduce nonsearchers average costs of living more than it does searchers even in the fixed sample size search case if the searchers search only a little moreover mean and support preserving increases in price dispersion may make it optimal to forgo fixed sample size search copyright 1994 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

who participates in household scanning panels we compare two widely used household scanning panels maintained by the nielsen company and information resources inc to a random sample of the u s population results indicate that the demographic characteristics of the random sample more closely match the census bureau data than the household scanning panels we also show that after controlling for demographic differences participants in the household scanning panels are slightly more price sensitive than participants in the random sample the two household scanning panels yield similar results in relation to one another which suggests that the household scanning panels may suffer from sample selection and participation biases

price dispersion and functional price indices let s denote a set of consumers who have identical nondecreasing ordinal quasiconcave utility functions u xs t u x t where xx t is the vector of n goods consumed by individual s at time t consumers shop at different stores and hence may pay different prices for commodities 4 let ps t and ys t denote exogenous vectors of commodity prices and income respectively faced by individual s at time t this does not preclude the existence of a subset 5 of consumers who all face the same prices i e p5 t ps t for all s s c s at each instant in time consumers attempt to

an analysis of substitution bias in measuring inflation 1959 851 we analyze the substitution bias in laspeyres type price indexes such as the cpi using 1959 1985 nipa consumption data for 101 commodities we employ two methodological approaches to calculation of the bias first we construct the tightest theoretical bounds on the col by applying nonparametric methods using algorithms developed by afriat and by varian second following diewert we construct superlative price index formulas namely tomqvist and fisher s ideal indexes under a chain as well as a fixed base specification homothetic preferences are found to be consistent with the data and sensitivity tests indicate that this result is not vacuous if the hypothesis of homotheticity is maintained the col bias has upper and lower limits of 0 22 and 0 14 percent per year respectively using the superlative indexes as the measure of the col the bias is about 0 18 percent per year for the period 1959 85 this estimate is somewhat larger than found in earlier studies our use of more disaggregated data is found to be responsible for part of the difference with the size of the estimated bias directly related to the extent of the aggregation

the laspeyres bias in the spanish consumer price index the cpi compares the cost of acquiring a reference quantity vector at current and base prices such reference vector is the vector of mean quantities actually bought by a reference population whose consumption patterns are investigated during a period prior to the index base period 0 this paper shows that unless the price change between these two dates is taken into account the cpi ceases to be a proper statistical price index of the laspeyres type among several negative consequences the most important is that this omission produces a bias in the measurement of inflation the laspeyres bias using spanish data the size of the laspeyres bias is estimated at 0 061 per year during 1992 1998 the laspeyres bias in shorter time periods reached 0 122 per year in 1992 and 0 108 in 1997

income distribution evaluation and the law of one price abstract the growing literature on evaluating changes in the distribution of income has led recently to a consideration of the conditions under which such evaluation is possible without reference to existing prices this paper provides a complete characterization of the class of preferences social orderings for which this is possible in the case where the law of one price is not assumed different individuals may face different price vectors the relationship of this result to those which are known for the one price case is also briefly considered

technology and competitiveness this paper reviews the literature on technology and competitiveness first the concept of the international competitiveness of a country and various theoretical approaches on the relationship between trade and growth are discussed then a number of empirical studies of the impact of technology as evidenced by r d patents etc on exports are examined the final section summarizes the evidence and considers the lessons for policy copyright 1996 by oxford university press

plant size tenure and discrimination in internal labor markets evidence on sex differentials abstract this paper examines the link between the operation of internal labor markets and sex differentials using 1983 may cps data we test whether male female differences in returns to tenure increase with plant size our results indicate that sex differentials in returns to tenure are only significant in plants employing more than 500 employees these results suggest that the discrimination that may exist within the framework of internal labor markets is most likely to be found in large plants

life cycle prices and production we use scanner data and time diaries to document how households substitute time for money through shopping and home production we document substantial heterogeneity in prices paid for identical goods for the same area and time with older households shopping the most and paying the lowest prices doubling shopping frequency lowers a good s price by 7 to 10 percent we estimate the shopper s price of time and use this series to estimate an elasticity of substitution between time and goods in home production of roughly 1 8 the observed life cycle time allocation implies a consumption series that differs markedly from expenditures

search and price dispersion in online grocery markets abstract consumers often purchase multiple products at a time from retailers creating multi product incentives for search in this paper we consider how product variety affects consumer search intensity and the dispersion of prices in multi product retail markets we employ online grocery pricing data from four large retailers in the uk to estimate search costs and equilibrium price dispersion for food products under circumstances where i consumers search for single products and ii consumers search for multiple products at once we compare estimates in each case between a model in which utility increases with product variety and a model in which utility is not a function of variety relative to our preferred specification with variety effects in utility we find estimates of both search cost and search frequency to be biased upwards in single product settings when variety effects are ignored however we find estimates of search costs are biased upwards while search frequency is biased downwards in multi product settings when variety effects in utility are ignored

multi commodity consumer search abstract this paper analyses the optimal search strategy for consumers who wish to purchase several different commodities possibly from several different firms but are not perfectly informed about the prices charged by each firm for every commodity it is shown that in general the optimal search strategy will not possess the reservation property the multi commodity equivalent of a reservation price necessary and sufficient conditions are identified for the optimal search strategy to possess the reservation property and it is shown that a critical sufficient condition is that the indirect utility function is submodular comparative static results are also presented journal of economic literature classification numbers d11 d81 d83

price dispersion and inflation evidence from israel the paper considers the question whether observed price differentials reflect perceived differences in quality service agreements or location or whether information imperfections can explain this phenomenon it sets out theoretical arguments linking inflation to reductions in the information stock held by agents and thus to greater price dispersion the hypothesis is tested using monthly price data for 13 uniquely defined goods sold in israel between 1971 and 1984 price dispersion is shown to be positively related to the rate of market price inflation since inflation is an unlikely proxy for changes in perceived characteristics the findings support price dispersion theories based on optimally imperfect decision making

the elasticity of substitution between time and market goods evidence from the great recession the elasticity of substitution between time and market goods we document a change in household shopping behavior during the great recession households purchased more on sale larger sizes and generic products increased coupon usage and shopping at discount stores we estimate that the returns to these shopping activities declined during the recession and therefore this behavior implies a significant decrease in households opportunity cost of time using the estimated cost of time and time use data we estimate a high elasticity of substitution between market expenditure and time spent on non market work we find that households smooth a sizable fraction of consumption by varying their time allocation during recessions institutional subscribers to the nber working paper series and residents of developing countries may download this paper without additional charge at www nber org

price dispersion in an automobile insurance market from automobile insurance data for alberta over the period 1974 81 we find thatpremiums are highly correlated across driver classes in a given year but that premiums for a given driver class are not correlated over a period of more than 5 years firms relative market shares among drivers over age 25 and married males under 25 are inversely related to their deviations from the mean premiums in these driver classes the variance of real premiums decreases with the numberof firms in the market and increases with the real loss cost per car insured and the number of cars insured from these results we conclude that the price dispersion in automobile insurance in alberta is based on costly consumer search

identifying and characterising price leadership in british supermarkets price leadership is a concept that lacks precision we propose a deliberately narrow falsifiable definition then develop it illustrate its feasibility and test it using the two leading british supermarket chains we find both firms engaging in leading prices upward over a range of products with the larger being initially more dominant but the smaller increasing leadership activity to take overall leadership over time however more price leadership events are price reductions than price increases consistently led by the smaller firm nevertheless the increases are of larger monetary amounts than the falls so average basket price increases over time

price index dispersion and utilitarian social evaluation the living standard indicator in utilitarian social evaluation functions usef is the ratio of a nominal living standard and a price index we show that under weak association of price indices and nominal living standards and usual concavity conditions on utility functions utilitarian social welfare increases with price index dispersion when the aggregate price level is superior to the arithmetic mean of price indices and diminishes when it is inferior to the harmonic mean

information gathering and cost of living differences among searchers abstract this note extends recent work on cost of living index numbers for a population of individuals who face imperfect and costly information about prices it is known that individuals with identical preferences but different incomes will require different cost of living adjustments unless preferences are homothetic however this result in based on a model of consumer behavior under costless information we analyze differences in the cost of living among searchers with different incomes and show that even if preferences are homothetic expected cost of living indices will generally vary across searchers with different references standards of living the reason for the differences is that under homothetic preferences reservation prices are a decreasing function of the searcher s standard of living

job duration seniority and earnings an important stylized fact about labor markets is that workers with longer seniority with their current employer have higher earnings than other workers with the same total labor market experience this study shows that workers in longer jobs earn more throughout than workers in a series of shorter jobs and that the measured positive cross sectional return seniority is largely a statistical artifact due to the correlation of seniority with an omitted variable representing the quality of the worker the job or the worker employer match the implication is tha t earnings do not in fact rise very much with seniority copyright 1987 by american economic association

a superpopulation theory approach to the design of price index estimators with small sampling biases this article uses simple superpopulation models to examine estimators for long and short term laspeyres price relatives based on pps samples

uk regional policy an evaluation introduct ion ities in unemployment during the recession of the early 1990s which bit deeply in the southern regions however the convergence of regional unemployment rates uk regional policy has existed at varying levels of intensity for nearly seven decades throughout its conceals persistent spatial disparities in unemployment at a higher level of disaggregation fig 2 shows that existence the overriding objective has been to provide economic help to the country s most heavily depressed those travel to work areas experiencing the highest unemployment rates in 1985 tend to be the same areas or least well ov areas a wide variety of policy measures have been used to create employment and thereby some 10 years later further table 1 shows that the spatial pattern of unemployment at county level has reduce unemployment in the areas with persistently high unemployment this paper has two primary aims remained remarkably stable broad regional aggregates conceal immense spatial disparities in unemployment rstly to identify the major bene ts of regional policy and secondly to investigate ways in which uk regional within regions and these spatial disparities are persistent over time it is this high unemployment persistence that policy can be made more evective and hence more eycient ultimately justi es spatially discriminating policies such as regional policy as a rst step it needs to be established that the uk actually has a regional problem it is easy to demonstrate the paper is organized as follows the next section identi es the major economic and social bene ts of that spatial disparities in unemployment at a broad level have virtually disappeared during the 1990s the regional policy followed by a review of recent government views on the case for regional policy the fourth north south divide that was so evident in the 1980s has been eroded by a substantial convergence in unsection compares two diverent approaches to solving regional problems the rst is a market based approach employment rates this is vividly illustrated in fig 1 which shows the dramatic narrowing of regional disparwhich aims to make local labour markets more exible

measuring poverty changes with bounded equivalence scales australia in the 1980s when measuring poverty an equivalence scale is used to take account of the different income needs of different family types however there is little consensus about the choice of scale a method is presented here that permits general statements about changes in poverty to be made which will be true for a range of equivalence scales the method is used to describe changes in poverty in australia between 1981 82 and 1989 90 different scales lead to estimates of the increase in the head count poverty rate between 1981 82 and 1989 90 of between 1 7 and 0 6 percentage points at commonly chosen poverty thresholds

consumer prices the consumer price index and the cost of living after presenting major findings and recommendations the cpi commission reiterates the estimate of a 1 1 percentage point per annum upward bias it rejects the contention that the bls already makes substantial corrections for quality change that quality improvements and new products accrue only to the rich and that procedures to make more extensive quality adjustments valuations of new products and adjustments for commodity and outlet substitution are impractical the bias in the cpi can be sharply reduced as the authors detail in this paper coauthors are ellen r dulberger robert j gordon zvi griliches and dale w jorgenson

internal labor markets contrary to the popular image of change and turnover most americans spend the majority of their working lives employed in a single firm the original essays in this book discuss the origins and importance of these internal labor markets providing new insights into their changing power and influence they also explore the more varied and dynamic employment practices that have evolved in large companies in response to new government regulations increased competition for managerial talent the difficult economy of the 1970s and to the threat of unions contents introduction the nature and importance of internal labor markets paul osterman the development of internal labor markets in american manufacturing firms sanford m jacoby the making and shaping of job and pay structures in the iron and steel industry bernard elbaum variations in managerial career structures in high technology firms the impact of organizational characteristics on internal labor markets rosabeth moss kanter the transformation of the industrial relations and personnel function thomas a kochan and peter cappelli white collar internal labor markets paul osterman job training employment practices and the large enterprise the case of costly transferable skills paul ryan the search for a societal effect in the production of company hierarchy a comparison of france and germany marc maurice francois sellier and jean jacques silvestre internal labor markets and paternalism in rural areas peter b doeringer

uk competitiveness policy vs japanese industrial policy it is often claimed that japanese industrial policy targeted high growth or high productivity growth sectors see inter alia johnson i982 carliner i986 nester i99i tyson 1992 it is then argued that because both the targeted industries and the japanese economy have prospered it follows that japanese industrial policy must have been successful hence britain and other advanced nations either are justified in emulating or should hasten to follow the japanese example this raises the question of whether the united kingdom s competitiveness policy is the appropriate response or is a completely different animal the purpose of this paper is to explore the main areas in contention but before doing so it is important to be clear about what one means by industrial and competitiveness policies

population intervals and the true cost of living index with known price distributions abstract this note provides a simple closed form expression for an aggregate cost of living index when prices paid differ across consumers properties of the lognormal distribution are used to construct a population interval around the index so that a given fraction of consumers have a true cost of living index in the interval

sources of bias and solutions to bias in the consumer price index four sources of bias in the consumer prices index cpi have been identified the most discussed is substitution bias which creates a second order bias in the cpi three other changes besides prices changes create first order effects on a correctly measured cost of living index coli i explain in this paper that a pure price based approach of surveying prices to estimate a coli cannot succeed in solving the 3 problems of first order bias i discuss economic and econometric approaches to measuring the first order bias effects as well as the availability of scanner data that would permit implementation of the techniques

price search in a product market regressions using panel data on grocery purchases show lower purchase costs are significantly associated with a larger number of stores visited per week there is also evidence but somewhat weaker of diminishing gains from such search an economic model of the determinants of search suggests that prices paid quantities purchased and number of store visits are interrelated a view supported by results of estimating a proposed simultaneous equations model

a note on price stability and consumers welfare the effects of commodity price stabilization on an individual consumer s welfare has been controversial ever since the issue was first analyzed by waugh 15 the early approach of waugh which was based explicitly on expected consumer s surplus and ignored the production side of the economy has since been generalized in several respects for instance turnovsky shalit and schmitz hereafter t s s 14 have suggested an approach that utilizes the indirect utility function of a single individual by focusing on a single consumer and comparing risk no risk situations where prices are random variables they derive interesting and useful results that express conditions for the desirability of price stabilization in terms of the familiar arrow pratt measure of relative risk aversion price and income elasticities and budget shares although the approach of t s s provides useful information about an individual s preference for or against price stability it does not provide information about a group of heterogeneous consumers preference for price stability the approach of t s s also assumes that perfect price stabilization is possible indeed in many cases government policy may serve to partially stabilize prices but not perfectly stabilize prices 2 thus the analysis of t s s does not address comparisons of risk risk situations the comparisons of unstable versus partially stabilized prices nor comparisons when there are heterogeneous individuals recently newbery and stiglitz 9 10 have used stochastic dominance rules to analyze mean preserving partial price stabilization schemes the purpose of the present note is to extend the t s s and newbery stiglitz analysis by providing comparisons of partial price stabilization policies that affect multiple prices in non mean preserving ways since an excellent survey of the stabilization literature appears in newbery and stiglitz 10 we proceed with the results of our analysis

should the cost of living index provide the conceptual framework for a consumer price index in some countries the cost of living col index serves as the conceptual framework for the cpi but it has been rejected in others this paper reviews issues that have arisen in the statistical agency debate and in the economics literature on the col index including rhetorical matters which have influenced the debate i contend that col theoiy is useful as a decision making framework in estimating components of the cpi and that col index theory provides appropriate guidance for measuring consumer inflation contrary to the view that has been adopted for the european hicp and expressed by an advisory committee for the rpi in several countries the united states netherlands sweden the theory of the cost of living col index provides the conceptual framework for the country s consumer price index cpi see united states department of labor 1997 balk 1994 and dalen 1999 others reject the cost of living index framework an example is the australian bureau of statistics 1997 rejection of the col index is also explicit in an rpi advisory committee recommendation in the united kingdom in still other countries canada being an example official documents for the cpi are ambiguous about the role of the col index statistics canada 1995 the international guideline for consumer price indexes the ilo manual turvey 1989 does not even mention the col index the question has taken on heightened interest recently part of the stimulus comes from the european union s relatively new harmonised indexes of consumer prices hicp for the hicps eurostat has rejected the col

constrained discretion in uk monetary and regional policy mcvittie e and swales j k 2007 constrained discretion in uk monetary and regional policy regional studies 41 h m treasury claims that the notion of constrained discretion which directs the effective operation of uk monetary policy applies equally to other delegated and devolved policies such as the use of regional development agencies in the delivery of english regional policy a transaction cost politics perspective is used to argue that the delegation of responsibility for monetary stabilization raises principal agent issues quite different to those encountered in the delegation of the responsibility for regional regeneration in particular the effectiveness and transparency that characterize present day monetary policy cannot be expected in regional policy further the institutional arrangements that accompany the operation of regional development agencies in england should be critically reviewed mcvittie e et swales j k 2007 la notion de discretion entravee dans les poli

do wages rise with job seniority many previous studies have found a strong positive effect of job seniority tenure on wages this paper re examines the evidence using a simple instrumental variables scheme to deal with the fact that tenure is likely to be related to unobserved individual and job characteristics that affect the wage we use the variation of tenure over a given job match as the principal instrumental variable for tenure the variation in tenure over the job is uncorrelated by construction with the fixed individual and job match specific components of the error term of the wage equation our main finding is that the partial effect of tenure on wages is small and that general labour market experience and job shopping account for most wage growth over a career the strong cross section relationship between tenure and wages is due primarily to heterogeneity bias prior researchers see mincer and jovanovic 1981 bartel and borjas 1981 borjas 1981 cline 1979 and mellow 1981 and many others have established that job seniority has a strong positive relationship with wage rates in a cross section or a cross section time series of individuals in this paper we re evaluate the evidence concerning the partial effects on wages of job seniority tenure and total labour market experience the extent to which wages rise with tenure is important for several reasons first and foremost the wage tenure profile is a fundamental question about the structure of earnings over careers second the wage tenure profile is a key determinant of the extent to which the earnings power of individuals is tied to specific jobs and it is important for assessment of the losses suffered by displaced workers hamermesh 1984 third evidence that wages rise with job tenure has been used to explain the decline in quits with tenure since the wage growth on the current job lowers the probability that the worker will locate a superior alternative a growing theoretical literature surveyed in parsons 1984 has taken the evidence of a strong wage tenure profile at face value and sought to provide an explanation for the relationship the most prominent explanation is the theory of specific human capital oi 1962 becker 1962 mincer 1974 parsons 1972 kuratani 1973 and hashimoto 1980 in which the growth of wages with tenure holding experience constant is attributed to the worker s share of investments in firm specific skills more recently lazear 1981 has presented a supervision model of wage growth in which firms defer compensation as a means of inducing workers not to shirk freeman 1977 and harris and holmstrom 1982 provide an explanation for wage growth based on an insurance motive salop and salop 1976 nickell 1976 and guasch and weiss 1982 present adverse selection models of wage growth in which firms use a wage tenure profile as a

do prices and attributes explain international differences in food purchases food purchases differ substantially across countries we use detailed household level data from the united states france and the united kingdom to i document these differences ii estimate a demand system for food and nutrients and iii simulate counterfactual choices if households faced prices and nutritional characteristics from other countries we find that differences in prices and characteristics are important and can explain some difference e g united states france difference in caloric intake but generally cannot explain many of the compositional patterns by themselves instead it seems an interaction between the economic environment and differences in preferences is needed to explain cross country differences jel d12 i12 l11 l66 q11 food purchases differ across countries within countries over time and across demographic groups these differences seem to be correlated with rates of excess weight gain and diet related illness economists tend to attribute the difference in food purchases across markets to differences in prices an alternative explanation is that they are due to inherent differences in preferences and eating habits in this article we study the differences in food purchases and nutritional outcomes across countries focusing on the united states united kingdom and france we start by systematically documenting the differences in food purchases for consumption at home between the united states united kingdom and france we show that us households purchase different foods from french and uk households for example us households purchase more calories per person a greater percentage of those calories comes in the form of carbohydrates and a lower share in the form of proteins a higher share of expenditure is on drinks and prepared foods and

the assessment international competitiveness the concept of international competitiveness as applied to national economies is a popular one politicians businessmen and economists alike re fer to it in day to day discussion when looking at the external export import market share or trade balance performance of different countries indi cators are produced showing changes in or levels of various countries competitiveness e g the relative price or cost indices regularly published by the imf and the oecd or the absolute measures produced by organizations such as the geneva world economic forum and the lausanne institute for management development governments of ten instigate research on the matter as for instance in the case of the 1993 us competitiveness policy council orthe 1995 eu competitiveness advisory group yet it has recently been argued by paul krugman that competitiveness is a meaningless word when applied to national economies and the obsession with competitiveness is both wrong and dangerous krugman 1994 p 44 apositionkrugman forcefully reaffirms in his contribution to this issue of the oxford review of economic policy

the consumer price index a research agenda and three proposals this paper argues that dealing with current concerns about the cpi within the framework of economic theory requires developing the theory of the cost of living index under more general assumptions than have thus far been standard it examines three neglected but critical issues that should rank high on the research agenda because of their practical implications for index number construction whose cost of living index why shop and what is a good it concludes by discussing the intersection between the technical problems of constructing the cpi and the political problems of indexing taxes and transfers

from skills revolution to productivity miracle not as easy as it sounds this article surveys the potential impact of skill on productivity it opens with a review of the utility of productivity as a measure of systemic economic performance and then goes on to explore the oft assumed close and strong relationship between skills and productivity the importance of other factors and types of investment is stressed these complementary elements may be at least as important as skill in boosting performance and their absence may negate the impact of public investment in education and training the ability of economic development policy particularly as it relates to the regional development agencies to address skills and economic development is assessed and questions are raised about what type and level of skill might have the largest impact on economic performance in conclusion we discuss the demands that new policy approaches are making upon the machinery and personnel of government

union nonunion compensation differentials across plant sizes evidence from cps 1983 previous empirical work on the relationship between plant size and union nonunion differentials has focused either on wages podgursky 1986 or benefits bramley wunnava and robinson 1989 freeman 1981 this note extends this research by simultaneously focusing on both wages and benefits there are several arguments that can be made in explaining union nonunion differentials across plant sizes 1 union threat effects 2 efficiency wage effects and 3 wage dispersion effects our study focuses on measuring the union nonunion differential in total compensation for this end estimates of total compensation are obtained using mellow s suggestion 1982 for combining hourly wage information with qualitative data on pensions and health insurance and ross s imputations 1989 for holidays and vacations benefits our results based on the may 1983 cps supplemented by bls data on pensions health insurance holidays and vacation benefits indicate significant union nonunion total compensation differentials exist only for workers in establishments with less than 500 workers these results are consistent with podgursky s wage differential findings

the assessment knowledge skills and competitiveness the autumn 1988 issue of the oxford review of economic policy considered the uk s deficiencies in vocational education and training vet it was there that finegold and soskice first popularized the notion of the low skills low quality equilibrium this assessment originally introduces a range of articles which discussed developments in the decade that has passed since then in the same journal issue no 1 1999 it argues that despite massive policy initiatives there has been only limited improvement in the uk s relative vet performance considerable progress has been made in analysis of market failures affecting the supply of skills and in analysis of the possible causes and consequences of low employer demand for skills systems failure the recent competitiveness white paper reflects this improved understanding

evidence on taxation and charitable giving from the 1983 u s treasury tax model file we have applied our model of taxation and charitable giving developed in reece and zieschang 1985 to the 1983 treasury tax model file and found no response of giving to marginal tax rates and a small response to income

the comparison of multi dimensioned distributions of economic status the literature on inequality measurement has been largely concerned with single dimensioned indicators this paper explores some of the issues which arise when there are several dimensions to inequality and these are not readily reduced to a single index concentrating particularly on the two dimensioned case we make use of results on multi variate stochastic dominance in portfolio theory extending these and applying them to the measurement of inequality the use of the dominance conditions is illustrated by an application to the international distribution of income and life expectancy

the effect of job tenure on wage offers a wage offer can be either acceptable or unacceptable to a worker but in cross sectional and panel data only acceptable wage offers are observed an ols wage equation will not reveal how job tenure affects wage offers but rather will reveal how tenure affects acceptable wage offers by jointly modeling the firm s determination of the wage offer and the worker s decision to accept or reject the offer we are able to estimate the effect of job tenure on wage offers consistently in contrast to the usual ols results we find that job tenure has no statistically significant effect on wage offers

consumer shopping behavior how much do consumers save this paper documents the potential and actual savings that consumers realize from four particular types of purchasing behavior purchasing on sale buying in bulk at a lower per unit price buying generic brands and choosing outlets how much can and do households save through each of these behaviors how do these patterns vary with consumer demographics we use data collected by a marketing firm on all food purchases brought into the home for a large nationally representative sample of u k households in 2006 we are interested in how consumer choice affects the measurement of price changes in particular a standard price index based on a fixed basket of goods will overstate the rise in the true cost of living because it does not properly consider sales and bulk purchasing according to our measures the extent of this bias might be of the same or even greater magnitude than the better known substitution and outlet biases

the substitution bias of the laspeyres price index an analysis using estimated cost of living indexes the most commonly used measure of the cost of living the consumer price index cpi published by the bureau of labor statistics is essentially a laspeyres price index it is well known however that a laspeyres price index provides an upward biased estimate of the cost of living because in keeping the same base period basket of goods as weights it does not take into account substitution among commodities induced by relative price changes the magnitude of the bias is an empirical question which is the focus of this study an estimate of the substitution bias may be obtained by taking the difference between the laspeyres price index and an estimated true cost of living index the true cost of living index cli is based on the theory of consumer demand it is the ratio of the minimum expenditures under two different price regimes necessary to maintain a constant level of utility as opposed to the constant basket of goods in the laspeyres index the size of the bias depends on two factors 1 the size of consumption substitution elasticities if there is no commodity substitution then the cli and laspeyres index coincide regardless of changes in relative prices and 2 the magnitude of relative price changes if all prices move together then the cli and laspeyres index again coincide regardless of the size of substitution elasticities in order to compute a true cli it is necessary to specify a particular utility function and estimate the parameters of the resulting system of demand equations see for example louis phlips p 135 several estimates of the magnitude of the substitution bias have appeared in the literature but all previous studies suffer from a common weakness they are all based on a very small number of commodities essentially because of econometric problems involved in estimating large systems of demand equations in one group of studies demand models have been estimated using highly aggregated data in which total consumption is grouped into four to nine aggregate commodites such as housing durables or clothing arthur goldberger and theodore gamaletsos for example estimate the linear expenditure system les demand model using data on five aggregate goods for several european countries and compare the resulting cli for one of the countries greece to the corresponding laspeyres price index tran van hoa estimates costof living indexes for six australian provinces using data on nine aggregate goods phlips cites work by r sanz ferrer who computed a cli for belgium from data on eight aggregate commodities in such studies using highly aggregated data the estimate of the substitution bias may be understated because the aggregation obscures substitution in consumption within categories which is perhaps more prevalent than substitution between gross aggregates another shortcoming of these three aggregate studies is the fact that they use only a single demand system and hence do not explore the sensitivity of the cli to a priori u s bureau of labor statistics the groundwork for this study was my dissertation i would like to thank the chairman and members of my committee r robert russell llad phillips and robert deacon for their support and helpful suggestions and jack triplett robert pollak richard j mcdonald and a referee for valuable comments on an earlier version the views expressed are my own and do not necessarily reflect the policies of the bureau of labor statistics for a theoretical discussion of cost of living indexes see robert pollak 1971b and paul samuelson and subramanian swamy

a survey of measurement biases in price indexes abstract this paper reviews the literature on measurement error in the major us price indexes the consumer price index cpi the producer price index rpi and the gross domestic product gdp deflators we take as our point of departure triplett s 1975 survey and focus on the studies of measurement error that have appeared since then we review the problems of substitution bias quality bias new goods bias and outlet substitution bias that are generally considered to be the main sources of error in price indexes the bulk of the paper is devoted to problems in the cpi and ppi as the gdp deflators tend to be based mainly on the components of these series we find that there has been surprisingly little work on the problem of overall measurement error in any of these price indexes and we conclude that there is very little scientific basis for the commonly accepted notion that measured inflation at 2 to 3 percent a year is consistent with price stability

the behavior of the cost of living at different levels of real income abstract the cost of living in the netherlands from 1952 to 1977 is analyzed at three different levels of real income the increase in the cost of living is larger for the more well to do

regional selective assistance is the spend enough and is it targeting the right places this article examines the uk regional selective assistance scheme and critically appraises on going reforms these reforms have been triggered by the process of redrawing the map of eligible areas within new european commission competition policy guidelines a recent uk government white paper on competitiveness has also led to significant changes being considered it is argued that while the existing reforms have not fundamentally changed the nature of regional selective assistance they may well be harbingers of more threatening challenges particularly after 2006

the industrial policy of competitiveness a review of recent developments in the uk the article reviews the recent developments in uk competitiveness policy and explores its relationship with industrial policy including regional industrial policy it argues that competitiveness is virtually synonymous with productivity growth but that while four competitiveness white papers of the 1990s potentially broadened the scope of uk industrial policy the shift from sectoral to horizontal measures has in fact helped much reduce the content of this policy the article reviews current industrial policy and expenditure distinguishing between the areas of science and technology small firms and regional policy it argues that industrial policy is now a part of competitiveness policy being closely aligned to the efficiency role of government it finds that while policy has converged on a narrower set of measures the traditional boundaries between the science and technology small firm and regional policy components have become much less clear cut

sales and consumer inventory temporary price reductions sales are common for many goods and naturally result in a large increase in the quantity sold we explore whether the data support the hypothesis that these increases are at least partly due to demand anticipation at low prices consumers store for future consumption this effect if present has broad economic implications we test the predictions of an inventory model using scanner data with two years of household purchases the results are consistent with an inventory model and suggest that static demand estimates may overestimate price sensitivity

housing depreciation and aging bias in the consumer price index i use hedonic regression methods to estimate average rental housing physical depreciation for areas of the united states i estimate downward quality bias of the u s consumer price index cpi caused by rental housing physical depreciation and i develop methods to correct the cpi for such aging bias my physical depreciation estimates imply that recent percentage changes in the u s cpi shelter cost indexes are downward biased by 3 to 4 annually such bias is nonnegligible because recent annual changes in the cpi shelter cost indexes have ranged between 3 5 and 6 8 for various regions my results also imply that rent controlled housing has depreciated faster than other rental housing

the consumer price index conceptual issues and practical suggestions a national academy of sciences panel recently made a number of recommendations to the bls for improving the consumer price index while also suggesting some cautions to be observed when considering the adoption of new concepts and techniques this paper discusses the panel s analyses in four areas should a cost of living index be the measurement objective of the cpi should the index attempt to capture the effect on living costs from changes in environmental conditions how can hedonic techniques be best applied for measuring quality changes should the bls attempt to measure the consumer surpluses accompanying the introduction of new goods

gender unions and internal labor markets evidence from the public sector in two states economists have been measuring developing theories for and explaining the sex based wage differential for several decades some theories such as human capital theory have focused exclusively on the characteristics and progress of individuals institutional approaches such as dual labor market and occupational sex segregation theories look solely at the structure of the labor market however examining average earnings by sex occupational titles or sectors masks another fundamental cause of the wage gap the lack of career advancement by women in both femaleand male dominated occupations the reason is that women are on a lower or different occupational ladder what can be called an internal labor market than men this paper combines the insights of earlier approaches by highlighting the effect that internal job structures and career ladders have in shaping individuals opportunities the hypothesis is that unions play a major role in altering the structure of opportunities creating ladders and allowing women access to higher level jobs as they have done for men

information multiprice search and cost of living index theory this paper derives the cost of living index of an individual who faces imperfect and costly information about prices traditional cost of living in dexes assume that the consumer passively accepts prices as given the authors derive a multiprice search model in which the consumer choos es the search strategy that minimizes the expected cost of buying a g iven level of utility in contrast to existing search models the mod el allows the consumer to change the allocation of expenditures among goods as information about prices changes and enables them to constr uct a cost of living index for an agent who searches across distribut ions of offer prices unlike traditional cost of living measures that ignore search behavior the searcher s cost of living index depends on search costs copyright 1987 by university of chicago press

prices and living standards evidence for rwanda abstract we review the explanations of the statistical relationship between spatial price indices and real living standards then using data from several seasons in rural rwanda we show that these variables are negatively associated hinting at price discrimination against the poor in that case policies permanently improving of market functioning may simultaneously improve efficiency and equity moreover under a hypothesis of weak association of nominal living standards and price indices we derive simplified formulae for social welfare indicators these formulae depend only on a small number of sample statistics obtainable from separate publications for prices and living standards

getting prices right what should be done much of the profession accepts that the cpi likely overstates the rate of increase of the cost of living it is less clear that there are sound and feasible steps that the bls can adopt to improve matters in the short run there are unresolved conceptual and identification problems in the measurement of quality superlative price indexes are not feasible and feasible approximations are not superlative and may not even be better the need for a single index that aggregates over heterogeneous consumers with different incomes tastes and needs casts serious doubt on the cost of living approach

frugality is hard to afford intertemporal savings strategies such as bulk buying or accelerating purchase timing to take advantage of a good deal provide long term savings in exchange for an increase in immediate spending

shopping around how households adjusted food spending over the great recession over the great recession real wages stagnated and unemployment increased concurrently food prices rose sharply outstripping growth in food expenditure and leading to a reduction in calories purchased this has led to concern about rising food poverty we study british households to assess how they adjusted to changes in the economic environment we show they switched to cheaper calories implying food consumption was smoother than expenditure we use longitudinal data to quantify the way households lowered their per calorie spending and show they done this in part by increasing shopping eort and without lowering the nutritional quality of