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Democratic Aggregation: Issues and Implications for Consumer Price Indexes

Robert S. Martin


Most consumer price indexes (CPI) implicitly weight households by their total expenditure. These may differ from indexes that weight households equally. I calcu- late so-called “democratic” counterparts to the Bureau of Labor Statistic’s CPI and Chained CPI products. The building blocks are household-level Lowe and Tornqvist indexes constructed using matched Consumer Expenditure Survey (CE) Diary and Interview microdata, along with CPI elementary item-area indexes. The impact of democratic aggregation is greater for the 2002-2008 period than it is for the 2009-2021 period, when it is often negligible. The impact also appears greater when the index uses higher frequency expenditure weights, like a monthly chained Tornqvist. However, this appears to be driven by durable goods for which micro expenditure data likely differ considerably from flow-of-service consumption.