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A student’s work this summer is helping launch a 10- to 15-year study of how undergraduates spend their money.

Not just a frivolous look at magazines, burgers, and khakis, the project is aimed at measuring precisely the statistical biases that distort a grander version of the survey: the federal government’s consumer price index.

Michael Kotov ’03 is writing the questionnaire and diary that will be used by Edward N. Gamber, associate professor of economics and business, to track the buying patterns of Lafayette students each year.

“It includes necessities and extras — all of the money they spend,” says Kotov. “I’ve already surveyed my roommate, and as soon as I finish the questionnaire, I’ll survey more people this summer. We are testing the questionnaire.” His involvement in Gamber’s project is made possible by Lafayette’s EXCEL Scholars program, in which students assist faculty with research while earning a stipend.

According to Gamber, biases in the government’s consumer price index, the measurement of prices paid by the typical U.S. urban consumer, tend to push up the level of reported inflation by 1 to 1.5 percentage points.

Those biases, he says, include undercounting of purchases made at discount stores such as Wal-Mart; consumers’ substitution over time of less expensive products for costly ones; the effect of quality improvements on products; and the tendency of prices of new products to fall rapidly right after they come on the market.

“The advantage of constructing this sample is that the biases can be measured precisely,” Gamber says. “The data will provide insight into how consumption patterns change over time and how they respond to relative price changes.”

He says the sample will not reflect representative prices in the Lehigh Valley. But he says he will be able to use the data to show his classes how price indexes are created.

Kotov is “doing a fantastic job,” according to Gamber. The project is “moving right along,” he says, with a test run in late July and launching to commence in August.

Kotov, who may eventually go into investment banking, says EXCEL is “definitely a good opportunity. I know so many students who are doing it.”

A graduate of George Washington High School in Philadelphia, Kotov is vice president of the International Affairs Club and treasurer of the Investment Club. He also is a member

Categorized in: Academic News