Chapter

Notes on Divisia Indices

W. M. Gorman

Edited by C. Blackorby and A. F. Shorrocks

in Separability and Aggregation

Published in print January 1996 | ISBN: 9780198285212
Published online November 2003 | e-ISBN: 9780191596322 | DOI: http://dx.doi.org/10.1093/0198285213.003.0004
 Notes on Divisia Indices

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This paper is from an unpublished typescript written for a workshop at the University of North Carolina in 1970, and is a summary of what was known at the time about Divisia price indices, plus some illuminating sidelights. The main properties of the indices are listed, noting the assumptions needed for each. The paper goes on to discuss the conditions under which the Divisia indices are independent of the path followed from the base to the current position. The conclusion is that given constant returns and perfect competition, the Divisia indices corresponding to a set of goods are independent of the path if a ’true’ aggregate exists for these goods, and then give the value of that aggregate, and of a corresponding price aggregate. The final section discusses a generalization of the idea of a Divisia index.

Keywords: aggregation; Divisia indices; path independence; price aggregates; price indices

Chapter.  4592 words. 

Subjects: Microeconomics

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