Showing papers by "Bart Hobijn published in 2002"
Posted Content•
TL;DR: In particular, the proposed increased government spending on homeland security does not evaporate the peace-dividend of the 1990s as mentioned in this paper, and even when one adds homeland security spending to the defense budget makes up a smaller fraction of GDP than in any year in between 1947-1995, the estimates presented here suggest that homeland security efforts in the private sector will permanently lower productivity levels in the business sector.
Abstract: The terrorist attacks of September 11 th 2001 have led to increases in both public and private spending on security. This article contains an estimate of the likely effects that these increased security measures will have on the economy. Since current proposals are to devote only a very small part of total resources to homeland security, the effect of homeland security on the economy will probably be relatively small. In particular, the proposed increased government spending on homeland security does not evaporate the peace-dividend of the 1990’s. Even when one adds homeland security spending to the defense budget, the proposed defense budget makes up a smaller fraction of GDP than in any year in between 1947-1995. Furthermore, the estimates presented here suggest that homeland security efforts in the private sector will permanently lower productivity levels in the business sector by about 1.12% for labor productivity and 0.63% for multifactor productivity.
41 citations
TL;DR: In this paper, the authors argue that the quality bias in price indexes is just as likely to be upward as it is to be downward, and they show that both the sign and the magnitude of the bias in the most commonly applied price index methods are determined by the cross-sectional variation of prices per quality unit across the product models sold in the market.
Abstract: It is often argued that price indexes do not fully capture the quality improvements of new goods in the market. Because of this shortcoming, price indexes are perceived to overestimate the actual price increases that occur. In this paper, I argue that the quality bias in price indexes is just as likely to be upward as it is to be downward. I show how both the sign and the magnitude of the quality bias in the most commonly applied price index methods are determined by the cross-sectional variation of prices per quality unit across the product models sold in the market. I do so by simulating a model of a market that includes monopolistically competing suppliers of the various product models and a representative consumer with CES (constant elasticity of substitution) preferences. I illustrate the bias in the commonly applied price index methods by comparing their estimates of inflation with the theoretical inflation rate implied by the data-generating process.
25 citations
Posted Content•
TL;DR: In this article, the authors argue that the quality bias in price indexes is just as likely to be upward as it is to be downward, and they show that both the sign and the magnitude of the bias in the most commonly applied price index methods are determined by the cross-sectional variation of prices per quality unit across the product models sold in the market.
Abstract: It is often argued that price indexes do not fully capture the quality improvements of new goods in the market. Because of this shortcoming, price indexes are perceived to overestimate the actual price increases that occur. In this paper, I argue that the quality bias in price indexes is just as likely to be upward as it is to be downward. I show how both the sign and the magnitude of the quality bias in the most commonly applied price index methods are determined by the cross-sectional variation of prices per quality unit across the product models sold in the market. ; I do so by simulating a model of a market that includes monopolistically competing suppliers of the various product models and a representative consumer with CES (constant elasticity of substitution) preferences. I illustrate the bias in the commonly applied price index methods by comparing their estimates of inflation with the theoretical inflation rate implied by the data-generating process.
14 citations
01 Jan 2002
TL;DR: In this article, the authors consider whether households face very different inflation experiences because of their varying expenditure patterns and, if so, whether these differences in inflation can be partly explained by different household characteristics.
Abstract: In this paper we consider whether households face very different inflation experiences because of their varying expenditure patterns and, if so, whether these differences in inflation can be partly explained by different household characteristics. We consider the evolution of the cross-household inflation distribution over the period 1987.02-2000.12 and revisit and update some of the main results on this question in the literature. We then proceed by estimating a consumer expenditure model, which allows us to calculate counterfactual inflation rates. We have two main results. First of all, in all months in our sample we observe a substantial variation in inflation rates across households. Secondly, both conventional methods as well as our counterfactual inflation rates suggest that there are no particular household characteristics that have a persistent and large effect on household specific inflation rates. Therefore, we conclude that measured inflation is not a structurally biased measure of inflation for