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Office of Survey Methods Research
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Published Year: 2022
Survey/Program(s): Office of Prices and Living Conditions
Catalog: Economic Working Paper
WP Number: WP-600
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Democratic Aggregation: Issues and Implications for Consumer Price Indexes
Abstract
Most consumer price indexes (CPI) implicitly weight households by their total expenditure. These may differ from indexes that weight households equally. I calcu- late so-called “democratic” counterparts to the Bureau of Labor Statistic’s CPI and Chained CPI products. The building blocks are household-level Lowe and Tornqvist indexes constructed using matched Consumer Expenditure Survey (CE) Diary and Interview microdata, along with CPI elementary item-area indexes. The impact of democratic aggregation is greater for the 2002-2008 period than it is for the 2009-2021 period, when it is often negligible. The impact also appears greater when the index uses higher frequency expenditure weights, like a monthly chained Tornqvist. However, this appears to be driven by durable goods for which micro expenditure data likely differ considerably from flow-of-service consumption.