STUDIES IN METHODS Series F No. 62
ST/ESA/STAT/SER.F/62

HANDBOOK OF THE INTERNATIONAL COMPARISON PROGRAMME

DEPARTMENT OF ECONOMIC AND SOCIAL DEVELOPMENT
STATISTICAL DIVISION
UNITED NATIONS, New York, 1992

UNITED NATIONS PUBLICATION
Sales No. E.92.XVII.12
ISBN 92-1-161350-7
Copyright (c) United Nations, 1992. All rights reserved.

The Handbook of the International Comparison Programme is a United Nations publication, Sales No. E.92.XVII.12, copyright (c) 1992 by the United Nations, all rights reserved. It is distributed on Internet for information and for the convenience of users. Printed and bound copies may be purchased from United Nations Publications. The Handbook is also available in French, Russian, Spanish, Chinese and Arabic translations.

No part of this publication may be reproduced or transmitted in any form or by any means, electronic or by any information storage and retrieval system, without permission in writing from the publisher.

NOTE

Symbols of the United Nations documents are composed of capital letters combined with figures.

GENERAL DISCLAIMER

The designations employed and the presentation of material in this publication do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries.Where the designation "country or area" appears in the headings of tables, it covers countries, territories, cities or areas.

CONTENTS

PREFACE

1. INTRODUCTION


1. Purpose of the Handbook
2. The place of the ICP in international statistics
1. National price levels and related concepts
2. National accounts and the ICP
3. The ICP problem in outline
4. Value of the ICP data provision to country statistical offices
5. Uses of the outputs of the ICP


2. EXPENDITURE DATA NEEDED


1. Gross domestic product as defined for ICP purposes
1. Sectoring of the expenditure accounts
2. Household consumption
1. Some consumption boundaries
2. Consumption financed by other sectors
3. Government consumption
4. Capital formation
5. Net exports
6. Dating of expenditure totals and details
2. Breakdown of GDP by aggregations of basic headings
3. Breakdown of GDP by basic headings


3. TASKS RELATED TO PRICE DATA


1. Outline of price requirements
2. Some principles of item selection
1. Temporal and ICP price sampling
2. Importance and identity
3. Number of items per basic heading
3. Obtaining national average annual prices
1. Annual average prices
2. National average prices
1. With outlet price variation and quantity weights
2. With outlet variation but without quantity weights


4. PRICE ESTIMATION AND ADJUSTMENT PROCEDURES


1. Indirect price comparisons
1. Education
2. Collective consumption of government
3. Medical services
2. Hedonic estimation and other price-slope adjustments
1. Hedonic price estimation
2. Price-slope adjustments
1. Size of purchase and package
2. Consumer durables and machinery and equipment
3. Construction
4. Some miscellaneous pricing issues
1. Equivalence in use
2. Identity of product


5. PROCESSING OF THE BASIC DATA


1. Purchasing-power parities for basic headings
1. The EKS method
2. The CPD approach
2. Aggregation of the basic heading parities up to the level of GDP
1. The G-K and EKS methods in brief
2. Linking of regional results and the fixity question
3. Extrapolation of benchmark estimates to other years

• Annexes


1. HISTORY AND ORGANIZATION OF THE ICP
2. METHODS OF AGGREGATION
3. ICP EXPENDITURE CLASSIFICATION AT DETAILED HEADING LEVEL


• Glossary
• References

PREFACE

The present Handbook is part of the technical documentation prepared for phase VI of the International Comparison Programme (ICP). The ICP is a world programme to produce estimates, comparable across countries in real terms, for the gross domestic product and its main aggregates. In the process, purchasing-power parities are obtained and used instead of exchange rates for converting data into a common currency.

The aim of the present document is to contribute to spreading technical knowledge needed at the national level by staff responsible for work on the ICP, especially in developing and newly participating countries. It deals mainly with ICP data requirements and offers guidance for related country operations. Moreover, the document is expected to help promote uniform understanding of the methodological principles in various countries and regions, thus ensuring minimum ICP standards to obtain comparable regional results and to facilitate linking them into a world comparison.

There is a wide range of written information available on general methodology of international comparison of prices and volumes, mainly published along with the reports on previous phases of the ICP. However, in the 25-year history of ICP, this is the first attempt to publish a Handbook that includes practical instructions on how participating countries should act in order to achieve a successful application of the general methods. Reflecting the needs for practical guidelines on the tasks country statistical offices have to carry out, the United Nations Statistical Commission, at its twenty-fifth session, gave priority to the publication of a Handbook for the ICP. 1/

In preparing the Handbook, the Statistical Division of the Department of Economic and Social Development received valuable assistance from a variety of sources. The conceptual framework and initial outline of the Handbook were elaborated by the late outstanding ICP experts, Messrs. Hugo Krijnse-Locker and Laszlo Drechsler. Acting as a consultant to the Secretariat, Mr. Drechsler prepared major portions of the first draft of the Handbook, which was supplemented by the work of Mr. Michael Ward of the World Bank. Professor Alan Heston of the University of Pennsylvania, with financial support from the World Bank, assisted the Secretariat by preparing a revised version of the full text of the Handbook. This draft text was widely circulated for comments and, working closely with the Statistical Division, Professor Heston incorporated the various comments received into the draft. The working document on the expenditure classification, included in annex III, was prepared by the Secretariat.

In its present form, the Handbook reflects, to the extent possible, the various useful suggestions forwarded to the Statistical Division during the several rounds of consultations with experts. In this regard, the substantial contributions of national and international organizations, such as the World Bank, the Organisation for Economic Cooperation and Development, the Austrian Statistical Office and the Institut national de la statistique et des études économiques (INSEE) of France, deserve particular mention. Naturally, one publication cannot answer all the questions in a programme as complex as the ICP. Thus, although the Handbook is intended to serve as a major source of information on ICP methods and their application, it will need to be supplemented by additional technical documents from time to time. Moreover, it is meant to be used together with any documentation prepared for the regional comparisons associated with ICP.

It is possible that, on the basis of further experience with comparison work in phase VI, it will be found useful to issue a revised ICP Handbook sometime in the future. The Statistical Division welcomes communications from users of the Handbook, country and international organizations involved in ICP work, concerning their experiences with the applicability of the Handbook.

1/ Official Records of the Economic and Social Council. 1989, Supplement No. 3 (E/1989/21), para. 108.