An index number formula problem: The aggregation of broadly comparable items

Abstract

Index number theory informs us that if data on matched prices and quantities are available, a superlative index number formula is best to aggregate heterogeneous items, and a unit value index is best to aggregate homogeneous ones. The formulas can give very different results. Neglected is the practical case of broadly comparable items. This article provides a formal analysis as to why such formulas differ and proposes a solution to this index number problem. © Statistics Sweden.