[{"data":1,"prerenderedAt":-1},["ShallowReactive",2],{"detail-sidebar-cat-0-en-105":3,"doc-seo-297233-105":59,"doc-detail-297233-en":131},{"code":4,"msg":5,"data":6},0,"success",[7,13,18,23,28,33,38,43,48,51,55],{"id":8,"doc_module":4,"doc_module_name":9,"category_name":10,"show_sort_weight":11,"slug":12},1,"Document","Story & Novel",90,"story-novel",{"id":14,"doc_module":4,"doc_module_name":9,"category_name":15,"show_sort_weight":16,"slug":17},2,"Literature",80,"literature",{"id":19,"doc_module":4,"doc_module_name":9,"category_name":20,"show_sort_weight":21,"slug":22},4,"Exam",70,"exam",{"id":24,"doc_module":4,"doc_module_name":9,"category_name":25,"show_sort_weight":26,"slug":27},5,"Comic",60,"comic",{"id":29,"doc_module":4,"doc_module_name":9,"category_name":30,"show_sort_weight":31,"slug":32},6,"Technology",50,"technology",{"id":34,"doc_module":4,"doc_module_name":9,"category_name":35,"show_sort_weight":36,"slug":37},7,"Healthcare",40,"healthcare",{"id":39,"doc_module":4,"doc_module_name":9,"category_name":40,"show_sort_weight":41,"slug":42},8,"Research & Report",30,"research-report",{"id":44,"doc_module":4,"doc_module_name":9,"category_name":45,"show_sort_weight":46,"slug":47},9,"Religion & Spirituality",20,"religion-spirituality",{"id":46,"doc_module":4,"doc_module_name":9,"category_name":49,"show_sort_weight":46,"slug":50},"World Cup","world-cup",{"id":52,"doc_module":4,"doc_module_name":9,"category_name":53,"show_sort_weight":52,"slug":54},10,"Lifestyle","lifestyle",{"id":56,"doc_module":4,"doc_module_name":9,"category_name":57,"show_sort_weight":24,"slug":58},19,"General","general",{"code":4,"msg":60,"data":61},"ok",{"site_id":62,"language":63,"slug":64,"title":65,"keywords":66,"description":67,"schema_data":68,"social_meta":124,"head_meta":126,"extra_data":128,"updated_unix":130},105,"en","is-equipment-price-deation-a-statistical-artifact-bart-hobijn-october-2001","Is Equipment Price De‡ation a Statistical Artifact? - Bart Hobijn - October 2001","","This paper argues that equipment price deflation may be overstated because common measurement methods rely on an incorrect assumption of perfectly competitive markets. The proposed intuition is that standard equipment price indices may capture not actual price declines but the erosion of market power for existing vintage machines. An endogenous growth framework with heterogeneous producers and monopolistically competing machine suppliers is used to show that estimated deflation can appear even when the model itself has no equipment price deflation.",{"@graph":69,"@context":123},[70,84,106],{"@type":71,"itemListElement":72},"BreadcrumbList",[73,77,79,82],{"item":74,"name":75,"@type":76,"position":8},"https://docshare.wps.com","Home","ListItem",{"item":78,"name":9,"@type":76,"position":14},"https://docshare.wps.com/document/",{"item":80,"name":40,"@type":76,"position":81},"https://docshare.wps.com/document/research-report/",3,{"item":83,"name":65,"@type":76,"position":19},"https://docshare.wps.com/document/is-equipment-price-deation-a-statistical-artifact-bart-hobijn-october-2001/297233/",{"url":83,"name":65,"@type":85,"image":86,"author":91,"headline":65,"publisher":94,"fileFormat":97,"inLanguage":63,"description":67,"dateModified":98,"datePublished":99,"encodingFormat":97,"isAccessibleForFree":100,"interactionStatistic":101},"DigitalDocument",{"url":87,"@type":88,"width":89,"height":90},"https://docshare.wps.com/thumbnails/is-equipment-price-deation-a-statistical-artifact-bart-hobijn-october-2001/297233.png","ImageObject",300,407,{"name":92,"@type":93},"Fez","Person",{"url":74,"name":95,"@type":96},"DocShare","Organization","application/pdf","2026-10-29","2026-09-18",true,{"@type":102,"interactionType":103,"userInteractionCount":105},"InteractionCounter",{"@type":104},"ViewAction",13,{"@type":107,"mainEntity":108},"FAQPage",[109,115,119],{"name":110,"@type":111,"acceptedAnswer":112},"Why might equipment price deflation be overstated in common statistics?","Question",{"text":113,"@type":114},"Because hedonic price methods and matched-model price indices implicitly assume perfectly competitive markets, which the paper argues is erroneous in this setting.","Answer",{"name":116,"@type":111,"acceptedAnswer":117},"What does the paper claim the price indices may actually capture?",{"text":118,"@type":114},"They may reflect erosion of market power of older vintage machines rather than a true decline in equipment prices.",{"name":120,"@type":111,"acceptedAnswer":121},"How does the endogenous growth model relate to the paper’s measurement argument?",{"text":122,"@type":114},"The model generates markups that cause standard methods to find equipment price deflation even though the model economy itself exhibits none.","https://schema.org",{"og:url":83,"og:type":125,"og:title":65,"og:site_name":95,"og:description":67},"article",{"robots":127,"canonical":83},"index,follow",{"doc_id":129,"site_id":62},297233,1790016454,{"code":4,"msg":5,"data":132},{"doc_id":129,"user_id":133,"nickname":92,"user_avatar":134,"doc_module":4,"category_id":39,"category_name":40,"doc_title":65,"doc_description":67,"doc_content":135,"file_id":136,"file_url":137,"file_type":138,"file_size":139,"view_count":105,"is_deleted":4,"is_public":8,"is_downloadable":8,"audit_status":8,"page_count":140,"language":141,"language_code":63,"site_id":62,"html_lang":63,"table_of_contents":142,"faqs":143,"seo_title":144,"seo_description":67,"update_tm":145,"read_time":146,"preview_page_count":4},2336478940794,"https://ap-avatar.wpscdn.com/davatar_9964176cb1d06d4a9deccf72a44ae3dc","Is Equipment Price De‡ation a Statistical Artifact?  \nBart Hobijn¤  \nFederal Reserve Bank of New York  \nOctober 2001  \nAbstract  \nI argue that equipment price de‡ation might be overstated because the methods used to measure it rely on the erroneous assumption of perfectly competitive markets. The main intuition behind this argument is that what these price indices might actually capture is not a price decrease but the erosion of the market power of existing vintages of machines. To illustrate my argument, I introduce an endogenous growth model in which heterogeneous …nal goods producers can choose the technology they will use. The various technologies are supplied by monopolistically competing machine suppliers. This market structure implies that the best machines are marketed to the best workers and are sold at the highest markup. In my model economy, the endogenously determined markups are such that standard methods will tend to …nd equipment price de‡ation, even though the model does not exhibit any equipment price de‡ation.  \nkeywords: imperfect competition, price indices, vintage capital.  JEL-code: O310, O470, C190 .  \n¤ Correspondence: Federal Reserve Bank of New York. Domestic Research Function.  \n33 Liberty Street, 3rd ‡oor. New York, NY 10045. E-mail: [bart.hobijn@ny.frb.org. The](bart.hobijn@ny.frb.org. The)[ ](bart.hobijn@ny.frb.org. The)views expressed in this paper do not necessarily re‡ect those of the Federal Reserve Bank of New York, nor those of the Federal Reserve System.  \nComments by Hielke Buddelmeijer, Boyan Jovanovic and Kevin Stiroh have been crucial when writing this paper. I am indebted to seminar participants at the FRBNY and IZA for their comments and suggestions.  \n1 Introduction and motivation  \nMany recent studies argue that one of the main driving forces behind the economic expansion of the 1990’s is the productivity growth in the information technology producing sectors. Virtually all of these studies, including Oliner and Sichel (2000), Gordon (2000), Jorgenson and Stiroh (2000), and Violante, Ohanian, Ríos-Rull, and Krusell (2000) argue that the productivity growth in the IT producing sectors is re‡ected in the steady decline of their output prices relative to GDP or consumption goods. Their argument is similar to that of Greenwood, Hercowitz and Krusell (1997), who like to refer to it as investment speci…c technological change. Namely, if the productivity growth rate of the investment goods producing sector is consistently higher than that of the …nal goods producing sector, then this will lead to a steady decline in the relative price of investment goods.  \nIf all markets would be perfectly competitive, as is assumed by all growth accounting studies referred to above, then this suggests that productivity growth in the IT producing sectors outpaces that of the consumption goods sector. This is a big if, however. Because, if these markets would be perfectly competitive then none of the IT producers would be able to make the pro…ts necessary to recoup the expenses they made on research and development of their products1 .  \nWhat I will show in this paper is that the measurement techniques used by the Bureau of Labor Statistics (BLS) and the Bureau of Economic Analysis (BEA) used to construct these investment price indices are likely to overestimate investment price de‡ation. The reason for this is that these methods, i.e. hedonic price methods and matched-model price indices, implicitely also assume perfectly competitive markets. The conventional assumption is that relative price declines in existing vintages when a new vintages enters the market are due to obsolescence, in the sense that the existing vintages become less productive relative to the frontier. In that case, relative price declines can be used as a measure of quality improvements and technological progress. In this paper I argue that in a market in which there is imperfect competition between the suppliers of the various vintage","cbCaikmTDeIFbo9X","https://ap.wps.com/l/cbCaikmTDeIFbo9X","pdf",534501,44,"English","# Abstract\n# 1 Introduction and motivation\n## Market competition and productivity-driven price declines\n## Measurement methods and overestimation of equipment price deflation\n## Paper structure and main argument steps","[{\"question\":\"Why might equipment price deflation be overstated in common statistics?\",\"answer\":\"Because hedonic price methods and matched-model price indices implicitly assume perfectly competitive markets, which the paper argues is erroneous in this setting.\"},{\"question\":\"What does the paper claim the price indices may actually capture?\",\"answer\":\"They may reflect erosion of market power of older vintage machines rather than a true decline in equipment prices.\"},{\"question\":\"How does the endogenous growth model relate to the paper’s measurement argument?\",\"answer\":\"The model generates markups that cause standard methods to find equipment price deflation even though the model economy itself exhibits none.\"}]","Is Equipment Price De‡ation a Statistical Artifact? - Bart Hobijn - October 2001 | PDF",1789743279,111]