What big data tells us about real income growth (Stephen Redding, David Weinstein, VOX)

Big data stands to transform economic measurement in substantial ways. The volume and precision of data available allows economists to revisit the foundational assumptions underpinning common indexes. This column presents a new empirical methodology that leverages big data to translate nominal numbers into real output or welfare. ‘The unified approach’ nests major price indexes and addresses implicit biases in these measures. An examination with barcode data suggests that standard methods of measuring welfare overstate cost of living increases by ignoring new products and demand shifts.

http://voxeu.org/article/what-big-data-tells-us-about-real-income-growth