Product Turnover and the Cost-of-Living Index: Quality versus Fashion Effects

摘要

This paper evaluates the effects of product turnover on a welfare-based cost-of-living index by incorporating the quality effect and the fashion effect. Employing scanner data for Japan for the years 1988-2013, we find that (i) the price and quantity of a new product tend to be higher than those of its predecessor at its exit; (ii) a considerable fashion effect exists for the entire sample period, while the quality effect is declining over time; and (iii) the discrepancy between the cost-of-living index estimated based on our methodology and the price index constructed only from a matched sample is not large.