The measurement of changes in real income under conditions of ...

Diploma Thesis from the year 2003 in the subject Economics - History, grade: 2.3 (B), Free University of Berlin (Finance and Social Policy), language: English, abstract: [...] First, I will give an overview of the U.S. economy in chapter 2. Afterhaving done that, I will present several aspects concerning the calculationof a Rothbarian virtual price system. Thereby, it will be importantto build an opinion about the preferences of the private households,which will be expressed as a generalized Cobb-Douglas demand system.Based upon that demand system an estimation equation for the households'preferences will be derived in section 3, followed by an ordinaryleast squares regression of the preference parameters.The second important step will be a presentation of the basic informationwe can win from index number theory. It will be especiallyinteresting to say a few words about economic index number theory(see chapter 4.2).The combination of the outcomes from estimation with index numbertheory makes up the most important step to unlock hidden dierencesbetween wartime-prices and postwar prices, i.e. I will compare wartimedemand to postwar demand and the impact of rationing on changesin income. This procedure will be done by calculating deators usingboth the estimated demand behavior and virtual prices.In every section, I will present both the basic theoretical aspects,which will help the reader understand the steps to deators, and appliedtheory, i.e. estimations using empirical data in most cases.