Code for: Quality Adjustment at Scale: Hedonic vs Exact Demand-Based Price Indices

Item-level transactions data yield cost-of-living indices that can account for qualitychange and consumer substitution. Transactions data require confronting the rapidturnover of items because prices of new and existing products are interrelated in equilibrium. This paper evaluates multiple approaches to measuring quality change atscale. It shows that a hedonic superlative approach—using econometrics or machinelearning for hedonic estimation combined with index formulas that require simultaneousobservation of item-level price and expenditure—yields improved measures of thecost of living. Accounting for ubiquitous quality change and for consumer substitutionyields lower measures of inflation than traditional, official methods.