Hedonic Imputation versus Time Dummy Hedonic Indexes

Edited by W. Erwin Diewert, Saeed Heravi and Mick Silver

in Price Index Concepts and Measurement

Published by University of Chicago Press

Published in print February 2010 | ISBN: 9780226148557
Published online February 2013 | e-ISBN: 9780226148571 | DOI:
Hedonic Imputation versus Time Dummy Hedonic Indexes

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This chapter deals with the “direct characteristics method” approach, in which the index change between two periods is computed using separate hedonic functions estimated for each period. It compares this method, which is called the “hedonic imputation method,” to the usual time dummy approach to hedonic regressions, and derives the exact conditions under which the two approaches to hedonic regressions will give the same two main and quite distinct approaches to the measurement of hedonic price indexes: time dummy hedonic indexes and hedonic imputation indexes. The chapter considers both weighted and unweighted hedonic regressions and finds exact algebraic expressions that explain the difference between the hedonic imputation and time dummy hedonic regression models. The weighting is chosen so that we are actually in a matched model situation for the two periods being considered, then the resulting hedonic regression measures of price change resemble standard superlative index number formulae.

Keywords: direct characteristics method; hedonic imputation method; index number formulae; hedonic regression models; matched model; price index

Chapter.  15423 words. 

Subjects: Econometrics and Mathematical Economics

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