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Taste change in the true cost-of-living index

Published online by Cambridge University Press:  17 August 2016

Eric de Souza
Eric de Souza*
Affiliation:
Université Catholique de Louvain
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Extract

The task of re-stating the theory of the true cost-of-living index when preferences are subject to taste change was undertaken by F. Fisher and K. Shell in their contribution to the Hicks' Festschrift [Fisher-Shell (1969)]. It was succeeded by a paper, co-authored by L. Phlips and R. Sanz-Ferrer (1972), that proposed an index different from the one elaborated by Fisher and Shell. They also expounded an algorithm for calculating the two indexes with the help of Phlips' dynamic linear expenditure system [Phlips (1972)].

The purpose of this paper is to extend the work of Fisher and Shell in three directions. First, taste change is parametrised in the utility function in such a way as to allow its application to Phlips' dynamic system. Secondly, a broader definition of the true cost-of-living index is provided. Thirdly, the influence of taste change on the index is less restrictive than in the Fisher-Shell case without, we believe, incurring the reproach of cardinality. It is patterned on the Phlips-Sanz-Ferrer approach.

Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 40 , Issue 1 , 1974 , pp. 55 - 68
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1974 

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Footnotes

*

Grateful thanks go to the Fonds de la Recherche Fondamentale Collective (Belgium) for the financial assistance that rendered this work possible. Due acknowledgement goes to Prof. Louis Phlips who encouraged its realisation, and commented on it.

References

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