The method of using regressions of prices on characteristics to adjust for quality changes has grown dramatically in the United States statistical agencies in recent years. For example, currently 18 percent of the final expenditures in gross domestic product is deflated using price indexes that use hedonic methods. These indexes are produced by at least four statistical agencies (the Bureau of Labor Statistics, the Bureau of the Census, the Federal Reserve Board, and the Bureau of Economic Analysis). This paper details the adoption of hedonic methods by each of these agencies and discusses some misconceptions about the role of hedonic methods in estimation of price indexes.
Presented at the November 30, 2001 meeting of the BEA Advisory Committee