Improving International Comparisons of Prices at Basic Heading Level: An Application to the Asia‐Pacific Region

25 Pages Posted: 20 Aug 2015

See all articles by Robert J. Hill

Robert J. Hill

University of Graz

Iqbal A. Syed

UNSW Australia Business School, School of Economics

Date Written: September 2015

Abstract

The International Comparisons Program (ICP) run by the World Bank compares prices and real incomes across countries, and plays a pivotal role in the Penn World Table. Using a unique dataset consisting of over 600,000 price quotes from nine countries in the Asia‐Pacific region, we consider ways of improving the basic heading price indexes that form the building blocks of ICP. Current ICP methodology computes these price indexes using the country–product–dummy (CPD) method applied to the country average prices. We contrast this approach with: (i) a weighted version of CPD; (ii) CPD applied directly to the individual price quotes; and (iii) extended versions of CPD that include adjustments for unrepresentative products, urban–rural price differences, and different outlet‐types. Also considered are new CPD‐based methods for measuring urban–rural price differences, and the implications of our findings for the downward revision in China's GDP in ICP 2005.

Keywords: China/Chinese GDP, country‐product‐dummy method, International Comparisons Program, representative and unrepresentative products, urban‐rural price differences

JEL Classification: C43, E31, O18

Suggested Citation

Hill, Robert J. and Syed, Iqbal A., Improving International Comparisons of Prices at Basic Heading Level: An Application to the Asia‐Pacific Region (September 2015). Review of Income and Wealth, Vol. 61, Issue 3, pp. 515-539, 2015. Available at SSRN: https://ssrn.com/abstract=2647136 or http://dx.doi.org/10.1111/roiw.12116

Robert J. Hill (Contact Author)

University of Graz ( email )

Universitaetsstrasse 15 / FE
A-8010 Graz, 8010
Austria

Iqbal A. Syed

UNSW Australia Business School, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia

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