Assessing the Bias in the Consumer Price Index from Survey Data

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This paper compares self-reported changes in families' financial status to actual changes based on annual time-series data calculated from the PSID. The results indicate that the Consumer Price Ind...

This paper compares self-reported changes in families' financial status to actual changes based on annual time-series data calculated from the PSID. The results indicate that the Consumer Price Index does a reasonably accurate job reconciling self-reported changes in financial status with measured changes in real income. Earlier work by Nordhaus (1998) reached a different conclusion because it did not account for changes in the shape of the income distribution.

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