Bill,
As I read Landsburg the Klenow-Bils idea is that if at time 1 the
rich own 100% more microwaves than the poor at a 25% higher price then
at time 2 when the poor own 100% more microwaves than at time 1 the
quality-adjusted price (unobserved) has fallen 25%. What they need to
assume is that the quantity/quality price that poor and rich consumers
face at time 1 continues to hold between time 1 and 2. My guess is that
the assumption requires some sort of uniform technological improvement
across the span of microwaves from low to high quality. (Probably also
some homotheticity type assumptions about preferences).
The examples you mention show that technological improvement is not
uniform across quality types but does the tradeoff change so fast that
the cross-sectional results are uniformative? Suppose, for example,
that you reestimate the cross sectional quantity/quality price every
five years - this is easy as there is plenty of data - then all you need
is more or less uniform technological improvement over any five year
span, which seems reasonable enough to me.
Alex
--
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
100 Swan Way
Oakland, CA, 94621-1428
Tel. 510-632-1366, FAX: 510-568-6040
Email: [EMAIL PROTECTED]
