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The Introduction of Hedonic Regression Techniques
For the quality adjustment of computing equipment in the Producer Prices Index (PPI) and Harmonised Index of Consumer Prices (HICP)
The purpose of this article is to describe National Statistics introduction of Hedonic Regression Techniques for quality adjustment of computing equipment in the Producer Prices Index and Harmonised Index of Consumer Prices.
This article explains, by way of background, the producer cost and option cost methods of quality adjustment currently employed for computing equipment in the Producer Prices Index (PPI) , the UK Harmonised Index of Consumer Prices (HICP) and the RPI. It then goes on to describe the method of quality adjustment using hedonic regression to be used in the PPI and HICP to adjust for quality changes in computing equipment indices from the February 2003 index, published in March. For the PPI this move to hedonic techniques covers both desktop personal computers (PCs) and notebook computers. For the HICP it covers just desktop PCs, but in principle will include notebook computers once these have been shown to have sufficient weight to enter the index. Current methods of quality adjustment will continue to be employed for other goods and services.
It should be noted that at present there is no plan for the introduction of hedonics into the RPI. The option cost method will continue to be used. We consider it to be appropriate to be more reserved about introducing methodological changes into the RPI given its widespread use in many important contexts and the fact that uniquely amongst National Statistics it cannot be revised.
Published in web format: 10 February 2003 at 9:30 am
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