TY  - JOUR
AU  - Feenstra,Robert C.
AU  - Shiells,Clinton R.
TI  - Bias in U.S. Import Prices and Demand
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4841
PY  - 1994
Y2  - August 1994
UR  - http://www.nber.org/papers/w4841
L1  - http://www.nber.org/papers/w4841.pdf
N1  - Author contact info:
Robert C. Feenstra
Department of Economics
University of California, Davis
One Shields Avenue
Davis, CA  95616
Tel: 530/752-7022
Fax: 530/752-9382
E-Mail: rcfeenstra@ucdavis.edu
M1  - published as Robert C. Feenstra, Clinton R. Shiells. "Bias in U.S. Import Prices and Demand," in Timothy F. Bresnahan and Robert J. Gordon, editors, "The Economics of New Goods" University of Chicago Press (1997)

M2  - featured in NBER digest on 1994-12-01
AB  - The purpose of the paper is to measure the potential bias in the U.S. import price index due to the appearance of new product varieties, or new foreign suppliers, and determine the effect of this bias on the estimated income elasticity of import demand.  Existing import price indexes are based on a sample of products from importing firms.  We argue that if the share of import expenditure on the sampled products is falling over time, this will lead to an upward bias in the measured index.  Using a correction based on the falling expenditure share on sampled countries, we find that the income elasticity of aggregate U.S. import demand is reduced from 2.5 to 1.7, or about halfway to unity.  Our estimates suggest that the aggregate import price index is upward biased by about one and one-half percentage points annually.
ER  -