NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Cellular Telephone, New Products and the CPI

Jerry Hausman

NBER Working Paper No. 5982
Issued in March 1997
NBER Program(s):   PR

Cellular telephone is an example of a new product that has significantly affected how Americans live. Since their introduction in 1983, cellular telephone adoption has grown at 25-35% per year such that at year end 1996 about 42 million cellular telephones are in use in the U.S. However, cellular telephone has not been included in the construction of the CPI, and the CPI will not include cellular telephone until 1998 or 1999. This neglect of new goods leads to an upward bias in the CPI. The analysis of the paper demonstrates that the gains in consumer welfare from a new product such as cellular telephone can be substantial. The paper also gives an approximation result which the BLS could use to calculate gains in consumer welfare from new products for use in the CPI. The BLS telecommunications CPI estimates that since 1988, telecommunications prices have increased by 8.5% or an increase of 1.02% per year. This estimate ignores cellular service. A corrected telecommunication services COLI that includes cellular service decreased from 1.0 in 1988 to 0.903 in 1996 for a decrease of 1.28% per year. Thus, the bias in the BLS telecommunications services CPI equals approximately 2.3 percentage points per year. The neglect of new products in the CPI can lead to significant biases.

download in pdf format
   (845 K)

email paper

An NBER digest for this paper is available.

A non-technical summary of this paper is available in the NBER Bulletin on Aging and Health. You can sign up to receive the NBER Bulletin on Aging and Health by email.

This paper is available as PDF (845 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w5982

Published: Hausman, Jerry, 1999. "Cellular Telephone, New Products, and the CPI," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(2), pages 188-94, April. citation courtesy of

Users who downloaded this paper also downloaded these:
Hausman Valuation of New Goods under Perfect and Imperfect Competition
Hausman w4970 Valuation of New Goods under Perfect and Imperfect Competition
Hausman w9298 Sources of Bias and Solutions to Bias in the CPI
Petrin w8227 Quantifying the Benefits of New Products: The Case of the Minivan
Hausman w7281 Efficiency Effects on the U.S. Economy from Wireless Taxation
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us