Thursday, December 30, 2004
That’s the problem examined in a new research paper from the National Bureau of Economic Research. In Measuring the Growth from Better and Better Goods, Mark Bils of the University of Rochester examines the quality changes in consumer durable goods, and tries to figure out how much of the price increases are the result of inflation, and how much quality improvement.
His conclusion? Since 1988, price increases have reflected primarily changes away from older to new and better products, rather than inflation.