Unit Values for Import and Export Price Indexes – A Proof of Concept

Abstract

The U.S. Bureau of Labor Statistics’ import and export price indexes (MXPI) are published from an ever decreasing sample relative to the size of trade. The Principal Federal Economic Indicator has an opportunity to retain and regain detailed MXPI using unit values calculated from comprehensive administrative trade data. Unit values are known to be biased, although bias is less prevalent among homogeneous products. This research presents a new methodological and statistical approach to blend unit values into official price indexes. First, a proof of concept for identifying homogeneous items is based on an analysis of two export products – dairy and vegetables – for 2015-16. The results provide a prototype and a roadmap for a consistent and testable approach that aligns with the concepts in official MXPI measures, maximizes the use of high-frequency data, and mitigates unit value bias. Applying the prototype, 52 of 142 import and 50 of 129 export 5-digit BEA End Use categories are identified as homogeneous using administrative data. This coverage accounts for 35 and 39 percent of the 2016 value of imports and exports, respectively. Incorporating unit values has the potential to deepen coverage and expand publication of detailed import and export price indexes. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.