HANDBOOK OF THE INTERNATIONAL COMPARISON PROGRAMME

Annex I - HISTORY AND ORGNNIZATION OF THE ICP

1. Systematic international comparisons based on purchasing-power parities that are antecedents of the ICP consist of:


1. Comparisons carried out in the 1950s under the auspices of the Organisation for Economic Co-operation and Development (OECD) (then the Organisation for European Economic Co-operation (OEEC); a/
2. Comparisons carried out since 1959 within the framework of the Council for Mutual Economic Assistance (CMEA); b/
3. Comparisons carried out in the early 1960s in the Latin American region; c/
4. Comparisons between centrally planned and market economies, carried out in the 1960s under the auspices of the Conference of European Statisticians. d/

These earlier studies helped contribute to the methodology of ICP work and to demonstrate the feasibility of international comparisons based on purchasing-power parities. The study of Paige and Bombach (1959) on the production side pointed out the very large data requirements if a full-scale approach is to be adopted.

2. The idea of moving from these limited comparisons to regular and more extensive comparisons, perhaps at the world level, first emerged at the thirteenth session of the United Nations Statistical Commission, held in 1965. The Commission recommended, as a first step, that a study be made of available experience and data in the field at the international, regional and national levels, with a view to formulating more specific proposals for this work.
3. The recommended study was undertaken in 1967, and a report entitled "International comparison of production, income and expenditure aggregates'' (E/CN.3/364) was submitted to the Statistical Commission at its fifteenth session, in 1968. The purpose of the report was to outline a project, to carry out comparisons for a selected number of countries for the years 1968 to 1971 and to develop, test and describe suitable techniques for more comprehensive comparisons to be carried out later. Because of the limited resources available in the United Nations budget for statistical purposes, members of the Commission considered that the project might be organized on the basis of participation by additional international organizations and with considerable assistance from Member States.

4. The United Nations International Comparison Project, which began its activities in 1968, indeed became a cooperative undertaking. The central project staff were organized into two units, one located at United Nations Headquarters and the other at the University of Pennsylvania, in Philadelphia. To enable the creation of the latter unit, the Ford Foundation made a major contribution in the form of a grant to the University. The World Bank provided substantial financial aid, and the statistical offices of the participating countries made substantial contributions in real terms. The first project director was Professor Irving B. Kravis of the University of Pennsylvania.
5. The first report on the ICP was published in 1975. e/ This publication contains a detailed description and discussion of the methods applied and presents the results of the comparison for 10 countries (Colombia, France, the Federal Republic of Germany, Hungary, India, Italy, Japan, Kenya, the United Kingdom of Great Britain and Northern Ireland and the United States of America) for both 1967 and 1970. This phase I report is far from being a world comparison; nevertheless, countries from almost all continents, at many levels of development and with different economic systems were represented in this small sample. Further, this pilot study implemented a methodology for multilateral comparisons that worked within a framework that provided for expanding the number of participating countries on a systematic basis.
6. The first phase was followed shortly by a second one, in which results for the reference years 1970 and 1973 were presented for 16 countries. Beginning with phase III, the ICP was planned as a regular exercise, to be conducted at five-year intervals, with 34 countries in 1975 (phase III), f/ 60 countries in 1980 (phase IV) g/ and 64 countries in 1985 (phase V). At the twenty-fifth session of the Statistical Commission, in 1989, the ICP was renamed. The letter "P" in the abbreviation now stands for Programme, not for Project, as before.
7. In addition to the impressive increase in the number of participating countries, several other important changes took place between phase I and phase IV of the ICP. After phase III, the role of the University of Pennsylvania, which had until then been the main engine of the ICP, was gradually transformed into that of adviser on methodological issues. Another notable change in ICP responsibility was the increasing role of the Statistical Office of the European Communities (EUROSTAT). EUROSTAT, in fact, became not only the organizer of the European Community comparison, but also, with its experienced staff, it has provided substantial technical assistance to a number of regional comparisons and to the work on establishing links among the various regions.
8. The most important change that took place between phase III and phase IV was the regionalization of the ICP. In the first three phases, some results were presented by region, but the valuation of each country's quantities was carried out at average prices of all participating countries. In phase IV and onward, countries participated through regions or country groups; first regional (e.g., African, OECD etc.) comparisons were carried out and then the world comparison was built up by linking across these groups.
9. Regionalization came into effect for several reasons. One very important reason has already been mentioned, namely, the strong support for regional comparisons by the European Communities, and other sponsors. A related reason was that the growing number of participating countries presented obstacles to maintaining a highly centralized organization scheme and, at the time, no international organization was in a position to take on the task of a direct world comparison of all countries.
10. For the most part, participating countries have provided domestic resources for the data collection for ICP, while the Statistical Division of the Department of Economic and Social Development of the United Nations Secretariat, EUROSTAT, OECD and the Austrian Central Statistical Office, in its capacity as organizer of the Eastern European comparison, have units concerned with ICP-type work. Early sponsors of the ICP, such as the Ford Foundation and a consortium of contributing countries organized by the World Bank, provided resources that allowed coordination of the benchmark comparisons, particularly among developing countries. In phases IV and V, EUROSTAT became the financial supporter of the African and Caribbean comparisons. In phase IV, the Inter-American Development Bank (IADB) provided a major contribution to the Latin American regional comparison; however, this effort was organized through a group of experts visiting countries and little experience was gained by country statistical offices, so that when IADB support was unavailable in phase V, no Latin American regional comparisons took place. The ESCAP regional comparison in phase V was assisted by the Government of Japan, the United Nations Development Programme (UNDP), the World Bank, and the Asian Development Bank.
11. The table below gives an overview of the participation by various countries in the first five phases of the ICP, presented by geographical distribution of the countries. The composition of ICP regions, however, does not necessarily correspond to geographically contiguous areas.

12. Since regionalization is the basic approach to obtaining internationally comparable results, the ICP is built up of individual regional comparisons which are, at the same time, components of the global comparison covering all participating countries. Consequently, related operational tasks and responsibility for carrying out ICP work is shared between the world centre of ICP and a number of regional organizing centres.
13. It is not the role of this Handbook to go into evolving details of organization of ICP work, which may be subjecttochange from phase to phase owing to changing circumstances. In the following paragraphs, a few broad indications of the approach to organization are provided, as so far envisaged, to guide forthcoming ICP activities.
14. Serving as the world centre of the ICP, the Statistical Division of the Department of Economic and Social Development of the United Nations Secretariat promotes central coordination in the implementation of the global ICP programme. The major task of the world centre is to foster the required degree of consistency among regional comparisons and the integrity of the global comparison so that regional results can ultimately be linked to generate as reliable, timely and useful world comparisons as possible. This activity also involves coordination of efforts by groups of countries, international organizations associated with them and prospective sponsors so that it can lead to methodologically sound regional comparisons on a timely basis. The central unit maintains close contact with the organizers of the regional comparisons and is only indirectly related to participating countries.
15. The world centre focuses attention on the development of the general methodological framework of ICP. Activities carried out by the centre include, in particular, the following:


1. Ensuring that the basic principles, concepts and definitions applied are the same in all comparisons;
2. Preparing the central breakdown of GDP expenditures and promoting the harmonization of regional expenditure classifications;
3. Requiring that the methods used by the regions are compatible and produce consistent results;
4. Coordinating methodological work to establish links among the regional comparisons;
5. Developing and maintaining descriptions of core commodities and promoting their inclusion into regional lists of specifications;
6. Facilitating the dissemination of technical knowledge on ICP and serving as a centre for exchanging technical information; making available to interested participants, for reference purposes, documents used in previous phases or materials prepared in a different region. For this reason it is essential that the world centre be informed about all regional operations concerning ICP.


16. Countries interested in participating in ICP join one (or, if they wish, parallelly more than one) of the regional comparisons. Regional organizers usually contact and invite countries to participate in the next benchmark comparison. However, information on the country composition of regions and agencies acting as regional coordinators can be obtained from the world centre.
17. Country participation in ICP is performed through interaction and cooperation with a designated regional centre. ICP inputs, mainly basic price and expenditure data, are submitted by the countries to the regional centre according to rules and an organizational framework set by the region itself. For better orientation of work at the country level, regional coordinators distribute technical instructions, worksheets, questionnaires, a timetable with detailed schedules of operations etc. They may invite countries to comment on the methodology and to participate in eventual workshops or consultations. At any rate, active involvement of countries in the methodological work, and in checking and evaluating results is desirable.
18. It rests with the regional organizers to define procedures for organizational as well as methodological arrangements at the regional level. Typical activities carried out by the regional centres include the following:


1. Adopting a regional expenditure classification, taking into account the central classification considered asthe minimum required breakdown. Regions may apply more detailed categories provided they permit arriving at the breakdown of the central classification;
2. Developing a regional list of specifications in collaboration with the countries, drawing on their national practices to the extent possible. The list has to cover the core commodities that are common in all regions;
3. Processing basic data collected from the countries. Methods used in generating regional results need not be uniform across regions, as long as they remain compatible with the world comparison methodology;
4. Preparing the report on the regional comparison.


19. Once regional comparisons are completed, the same data that countries had provided for regional comparison purposes are used in the global comparison. Thus, the Statistical Division makes arrangements for generating world comparison results and prepares the report of the global comparison.

a/ See Gilbert and Kravis (1954) and M. Gilbert and others, Comparative National Products and Price Levels (Paris, 1958). Some earlier studies are also cited in Kravis (1984).

b/ For a description of this programme, see Gyorgy Szilagyi, "An intercountry comparison of the national income of planned economies", The Review of Income and Wealth, No. 2 (1962), pp. 169-173.

c/ See "The measurement of Latin American real income in US dollars", Economic Bulletin for Latin Americaf vol. XII (October 1967). In addition, a major comparison was undertaken for Latin America in 1968; see Jorge Salazar-Carrillo, "Latin American real product comparisons", Economic Journal (December 1977).

d/ See Conference of European Statisticians, Comparison of Levels of Consumption in Austria and Poland (New York, 1968).

e/ Kravis, Kenessey, Heston and Summers (1975).

f/ Kravis, Heston and Summers (1982).

g/ The phase IV report World Comparisons of Purchasing Power and Real Product for 1980, was published jointly by the United Nations and the Statistical Office of the European Communities (EUROSTAT), in 1986 (part I) and 1987 (part II).

aa/ In phase I, there were six countries, which also provided benchmark data for 1967.

bb/ In phase II, six additional countries provided benchmark data for 1970, which was combined with revised data for the original 10 benchmark countries; in addition, all estimates were also made for 1973 based on some original and some updated price data.