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The University of Southampton

STAT6091 Index Numbers

Module Overview

The aim of this module is to provide an understanding of the modern theory and practice of index numbers as a means of making price and quantity comparisons

Aims and Objectives

Module Aims

• Be familiar with index numbers methods and have a detailed knowledge of the algebra • Be able to provide practical solutions to general aggregation problems • Understand the competing merits of different approaches to index number problems and methods for dealing with quality change and new goods

Learning Outcomes

Learning Outcomes

Having successfully completed this module you will be able to:

  • Demonstrate knowledge and understanding of index numbers theory and methods and be able to provide practical solutions to general aggregation problems.
  • Demonstrate knowledge and understanding of the competing merits of different approaches to index number problems and methods for dealing with quality change, and be able to choose appropriate methods for use in constructing an index number


Introduction to Index Numbers and Overview - The Index Number Problem - Taxonomy of approaches - Implicit and direct index numbers - Index number formulae - Basic issues in index number calculation - Current issues in Index Numbers - Test/Axiomatic Approaches to Index Numbers - Bilateral Indices - Fixed Base and chained indices - Multilateral index number approaches - Making international comparisons – the Penn World Tables and the ICP data - Economic Approaches to Index Numbers - Preliminaries - Cost of living index - Testing the economic approach - Constructing a cost-of-living index - Estimation approximation - Exact and superlative index numbers - Nonparametric bounds - The Divisia Index - Continuous time index numbers - Deriving the Divisia - Implementing the Divisia - Distributional Issues - Cross-sectional variation in index numbers - Index numbers and the measurement of economic welfare - Summarising tax and benefit reforms - Hedonics and Quality Change - New goods and some solutions - New goods as rationing - Methods for deriving virtual prices - Problem of quality change and some solutions - Modelling quality change - The repackaging model - The linear characteristics model - Measuring Productivity - Partial factor productivity - Total factor productivity - Multilateral productivity indices - Growth accounting - Regression methods - Nonparametric methods

Special Features

This module is run as a week-long short course, a component of the MSc in Official Statistics

Learning and Teaching

Independent Study79
Total study time100

Resources & Reading list

Laboratory space and equipment required. Computing Lab in STATA

Diewert, W.E. and Nakamura, A.O (eds.) (1993). Essays in Index Number Theory, Volume 1. 

Staff requirements (including teaching assistants and demonstrators). Guest lecturer from the ONS presenting practical applications



MethodPercentage contribution
Coursework assignment(s) 100%


MethodPercentage contribution
Coursework assignment(s) 100%

Repeat Information

Repeat type: Internal & External

Linked modules

Pre-requisites: STAT6095 AND STAT6093


Costs associated with this module

Students are responsible for meeting the cost of essential textbooks, and of producing such essays, assignments, laboratory reports and dissertations as are required to fulfil the academic requirements for each programme of study.

In addition to this, students registered for this module typically also have to pay for:

Approved Calculators

Candidates may use calculators in the examination room only as specified by the University and as permitted by the rubric of individual examination papers. The University approved model is Casio FX-570 This may be purchased from any source and no longer needs to carry the University logo.


You will be expected to provide your own day-to-day stationery items, e.g. pens, pencils, notebooks, etc.


Where a module specifies core texts these should generally be available on the reserve list in the library. However due to demand, students may prefer to buy their own copies. These can be purchased from any source. Some modules suggest reading texts as optional background reading. The library may hold copies of such texts, or alternatively you may wish to purchase your own copies. Although not essential reading, you may benefit from the additional reading materials for the module.

Please also ensure you read the section on additional costs in the University’s Fees, Charges and Expenses Regulations in the University Calendar available at

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