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Is the Carli index flawed?: assessing the case for the new retail price index RPIJ.

ABSTRACT: The paper discusses the recent decision of the UK's Office for National Statistics to replace the controversial Carli index with the Jevons index in a new version of the retail price index-RPIJ. In doing so we make three contributions to the way that price indices should be selected for measures of consumer price inflation when quantity information is not available (i.e. at the 'elementary' level). Firstly, we introduce a new price bouncing test under the test approach for choosing index numbers. Secondly, we provide empirical evidence on the performance of the Carli and Jevons indices in different contexts under the statistical approach. Thirdly, applying something analogous to the principle of insufficient reason, we argue contrary to received wisdom in the literature, that the economic approach can be used to choose indices at the elementary level, and moreover that it favours the use of the Jevons index. Overall, we conclude that there is a case against the Carli index and that the Jevons index is to be preferred.

SUBMITTER: Levell P

PROVIDER: S-EPMC4309498 | biostudies-literature | 2015 Feb

REPOSITORIES: biostudies-literature

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Is the Carli index flawed?: assessing the case for the new retail price index RPIJ.

Levell Peter P

Journal of the Royal Statistical Society. Series A, (Statistics in Society) 20140430 2

The paper discusses the recent decision of the UK's Office for National Statistics to replace the controversial Carli index with the Jevons index in a new version of the retail price index-RPIJ. In doing so we make three contributions to the way that price indices should be selected for measures of consumer price inflation when quantity information is not available (i.e. at the 'elementary' level). Firstly, we introduce a new price bouncing test under the test approach for choosing index numbers ...[more]

PMID: 25673922

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Project description:BackgroundAs part of the initiatives to increase price transparency for consumers, pharmaceutical industry in Malaysia have been encouraged to declare the wholesale and recommended retail prices (RRP) of medicines to the Pharmaceutical Service Department (PSD) yearly. However, the relationship between the voluntary price reporting practices and consumers' retail medicine price is unknown. Therefore, this study aims to evaluate the effect of the voluntary price reporting practice of pharmaceutical industry on retail medicine prices, factors that may affect consumer medicine prices in Malaysia's private healthcare sector, and the retail medicine pricing trend over 2011-2015.MethodsA yearly correlation test for a 5-year period was performed to investigate the association between the wholesale and RRP medicine prices declared by the pharmaceutical industry from 2011 to 2015 on the one hand and the consumer wholesale and retail medicine price database on the other hand. The median price ratio (MPR) was calculated by comparing the consumer retail medicine price to its international reference price. The Krukal Wallis test was used to analyse the pricing trend throughout the 5-year period, and factors that might elevate the MPR above 2.5 were modelled using binary logistic regression.ResultsA total of 2527 medicine price data were analysed. There was a strong significant association between medicine prices declared to the PSD and the retail medicine prices in every year of the 5-year period. Moreover, there was no significant increase in retail medicine prices throughout the 5-year period. The medicine types, retail location, type of manufacturer, medicinal indications, declared wholesale and RRPs significantly influenced the consumer MPRs that where > 2.5.ConclusionThe declared medicine price was found to have a significant association with the consumer retail medicine price. Thus, it may be a useful reference for consumers purchasing medicines in private healthcare settings. However, the government of Malaysia must develop strategies to increase medicine price transparency for price-control mechanisms in the private healthcare sector.

Dataset Information

Is the Carli index flawed?: assessing the case for the new retail price index RPIJ.

Publications

Is the Carli index flawed?: assessing the case for the new retail price index RPIJ.

Similar Datasets

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