Nguyen, Thang (2005): Separating Productivity and Quality Effects from Relative Prices.
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Based on a general equilibrium model, we derive a relative price function which can be decomposed into productivity and quality effects. We then develop a method for inferring relative quality changes and apply that to US services versus US goods using NIPA data from 1946-2005. First, relative quality was decreasing after 1946 and has been increasing since the 1970s. Second, relative productivity and quality are negatively correlated, suggesting an endogenous link between the two. Third, productivity changes alone cannot fully explain the evolution of the services-goods relative price. This suggests that ignoring quality variations when explaining relative prices or exchange rates can lead to incorrect conclusions.
|Item Type:||MPRA Paper|
|Original Title:||Separating Productivity and Quality Effects from Relative Prices|
|Keywords:||quality innovation; quality inference; business cycles|
|Subjects:||E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level; Inflation; Deflation
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles
|Depositing User:||Thang Nguyen|
|Date Deposited:||13. Nov 2006|
|Last Modified:||17. Feb 2013 20:09|
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Available Versions of this Item
Separating Quantity Shock and Quality Innovation in Relative Prices. (deposited 08. Oct 2006)
- Separating Productivity and Quality Effects from Relative Prices. (deposited 13. Nov 2006) [Currently Displayed]