RESULTS OF PRODUCT-PRICE STUDIES: A Survey of Nine Product-Price Studies 9

Posted by Connie R. Aponte on May 15, 2014 in RESULTS OF PRODUCT-PRICE STUDIES |

The econometric component of their product-price analysis basically follows equation (2) with the inclusion of an additive error term plus a constant to allow for “possible trends in price variables due to ‘outside’ forces” (p. 22).
In estimating this equation BC expand the scope of previous work in several ways. First, like Leamer they cover three decades: 1968 to 1973, 1973 to 1979, and 1979 to 1991. Second, they include all industries in the economy, not just manufacturing industries. Altogether they have 79 two-digit SIC industries used in input-output tables constructed by the Bureau of Economic Analysis (BEA). To ease comparability with previous research their main results are reported two ways: for all industries together and for just manufacturing industries. too many payday loans
Third, they obtain employment from the Current Population Surveys (CPS) which report skills by educational attainment. Educational data are probably a better measure of skills than the commonly used nonproduction-production job classification (which is only meaningful for manufacturing industries). Moreover, these data allow more flexible definitions of skill groups. BC work with three different groupings: 1 to 12 years and 13 or more years; 1 to 11 years and 12 or more years; and 1 to 11 years, 12 years, and 13 or more years. In addition to labor BC also include physical capital. To control for intermediate inputs BC use input-output tables to construct total factor cost shares (i.e., they construct cost shares as given by equation (3’)). These I-O tables are available only Census of Manufacturing years, so BC use cost shares from 1967 for their first time period, 1972 for their second period, and 1977 for their final period. In their main analysis BC use annualized changes in domestic product prices (with the endpoints for each period taken as three-year averages to prevent outlier years from influencing the results). In addition, for manufacturing BC replicate their analysis for the 1980s using export and import prices from 1982 through 1992 (total price changes, not annualized). Finally, BC use both unweighted and weighted least squares with either employment or output weights.

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