Arlan BRUCAL – Research Officer (postdoctoral) at the London School of Economics, Grantham Research Institute for Climate Change and the Environment (GRI). PhD from the University of Hawaii at Manoa and a BS and MA from the University of the Philippines.
Enrica DE CIAN – Associate Professor in environmental economics at Ca’ Foscari Unversity of Venice (Italy) and ERC Starting Grant grantee with the project ENERGYA – Energy use for Adaptation.
We build novel welfare-based price indices for major household appliances that leverage changes in same-model prices and how consumers substitute between exiting, continuing and new models. We then evaluate how minimum energy efficiency requirements and changing criteria for Energy Star labels affected these indices in the US between 2001 and 2011, a period of time when some appliances experienced standard changes while others did not. We find that prices declined while quality and consumer welfare increased, especially when standards become more stringent. We also find that much of the price index decline can be attributed to standards-induced innovation, or cannibalism, not to inter-manufacturer competition. Our results also add to a growing body of evidence that the Consumer Price Index exaggerates inflation due to inadequate account of quality and substitution toward new goods.