Abstract
The Theil-Tornqvist (TT) index is a well-known index for binary comparisons of cost-of-living and for comparisons of prices, real output and productivity. Caves, Christensen, and Diewert (CCD) propose a multilateral method based on a simple averaging procedure that is consistent and base-invariant. The aim of this paper is to derive the TT, CCD, and a generalized CCD multilateral index (which takes into account a measure of economic distance between the different price and quantity vectors) using an econometric model. The problem of bias in the estimation of the TT index in its multiplicative form is considered and a class of UMVUEs of the indices and their standard errors are derived. A numerical illustration using the price and quantity data for sixty countries from the Phase IV of the International Comparisons Project is also included.
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