Errors in Output Deflators Revisited: Unit Values and the PPI
(273 K)
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NBER Working Paper No. 3935
Issued in December 1991
NBER Program(s): PR
Extending a methodology developed by Lichtenberg and Griliches (1989), we examine the extent of measurement error in two independent indicators of price change: the producer price index (PPI) and the U.S. Census Bureau's unit value relative (UVR). Estimation of factor analytic models is improved by the availability of more accurate and comprehensive proxies for price and quality change within industries and a more complete specification of the econometric model. We find that the UVR is a "noisier measure of price change than the PPI and that the PPI adjusts for approximately 57% of product quality change.
Published: EI, Vol. 32, no. 1 (1994): 11-32.
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