Alessia Longhi

We draw on a complete data-base for the Italian automotive market which allows to identify make, model and version for all the vehicles sold, including the main technical characteristics for each version. The period considered is from January 1998 to March 2002. The main result is that the official inflation rate, measured on a sample, underestimates the true inflation rate, measured on the universe. Over the period the official annual inflation rate was +2,1 percent, while our estimate on the universe was + 5,2 percent. We suggest two explanations: increasing market variety and improved quality. Our estimates confirm a significant increase in market variety. Inflation rate is lower in the lower market segments and higher in the higher ones, perhaps not full represented in the sample. The role of quality is confirmed, but its effective impact on inflation measure is ambiguous.