TY  - JOUR
AU  - Logan,Trevon D.
TI  - Are Engel Curve Estimates of CPI Bias Biased?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13870
PY  - 2008
Y2  - March 2008
UR  - http://www.nber.org/papers/w13870
L1  - http://www.nber.org/papers/w13870.pdf
N1  - Author contact info:
Trevon Logan
The Ohio State University
410 Arps Hall
1945 N. High Street
Columbus, OH 43210
Tel: 614-292-0762
Fax: 614-292-3906
E-Mail: logan.155@osu.edu
AB  - A recent literature has advanced the use of Engel curves to estimate overall CPI bias. In this paper, I show that the methodology is sensitive to the modeling of household demography. Existing estimates of CPI bias do not account for the changing effect of household size on budget shares, and this can lead to omitted variable bias. Since the effect of household size on demand changes over time the drift in Engel curves attributed to CPI bias is partially explained by this effect. My estimates of the annual rate of CPI bias from 1888 to 1935 are changed by at least 25%, and usually more than 50%, once the changing effect of household size is accounted for.
ER  -