International Comparison Program (ICP)
The ICP is a worldwide statistical initiative led by the World Bank under the auspices of the United Nations Statistical Commission, with the main objective of providing comparable price and volume measures of gross domestic product (GDP) and its expenditure aggregates among countries within and across regions. Through a partnership with international, regional, sub-regional and national agencies, the ICP collects and compares price data and GDP expenditures to estimate and publish purchasing power parities (PPPs) of the world’s economies.
Purchasing Power Parities (PPPs)
PPPs measure the total amount of goods and services that a single unit of a country’s currency can buy in another country. The PPP between countries A and B measures the number of units of country A’s currency required to purchase a basket of goods or services in country A as compared to one unit of country B’s currency to purchase a similar basket of goods in country B. PPPs can thus be used to convert the cost of a basket of goods and service into a common currency while eliminating price level differences across countries. In other words, PPPs equalize the purchasing power of currencies. Due to large differences in price levels across economies, market exchange rate- converted GDP does not accurately measure the relative sizes of economies and the levels of material well-being. PPPs make it possible to compare the output of economies and the welfare of their inhabitants in ‘real’ terms, thus controlling for price level differences across countries.
Uses of PPPs
PPPs are widely used to convert national accounts data, like GDP, into a common currency, while also eliminating the effect of price level differences between countries. Since the demand for comparable volume aggregates is high, PPPs play a key role in the analyses carried out by policymakers, multilateral institutions, and private sector actors, among others.
Major uses by international organizations (Detailed list)
Major uses by policymakers, academia and private sector (Detailed list)
The ICP was established in 1968 as a joint venture of the United Nations Statistical Division (UNSD) and the International Comparisons Unit of the University of Pennsylvania with financial contributions from the Ford Foundation and the World Bank. It started as a modest research project but the ultimate goal was to set up a regular program of global purchasing power parity (PPP)-based comparisons of gross domestic product (GDP).
The initial intent was to cover GDP from both the expenditure and production side of national accounts. To date, comparisons have only been made from the expenditure side since they are less difficult to implement in practice. They involve only one set of final expenditures, whereas comparisons from the production side involve both outputs and inputs and have the added complexity of double deflation.
Comparisons of final expenditure on GDP have been completed for 1970, 1973, 1975, 1980, 1985, 1993, 2005, and 2011. Country participation consisted of 10, 16, 34, 60, 64, 117, 146, and 199 countries respectively.
After the 1975 comparison, the ICP discarded its research status and became a regular part of the UNSD work program and was regionalized. United Nations regional commissions organized regional comparisons which the UNSD oversaw and coordinated to ensure that they could be combined in a global comparison.
With regionalization came the emergence of the Eurostat-OECD PPP Program in the early 1980s. In the beginning, the program followed the same five-year cycle as the ICP and covered only EU member states and OECD member countries. Since 1990, the program has operated on a three-year survey cycle and coverage has been extended to European countries that are not members of either the European Union or the OECD. Eurostat makes benchmark comparisons annually for EU member states and EU associated countries. The OECD makes benchmark comparisons every three years covering all countries participating in the program.
1993 was the first time that all regions of the world were covered, but no global comparison was made. As a result, the United Nations Statistical Commission (UNSC) reviewed the ICP. The World Bank proposed a new strategy to address limitations and improve the program.
At its 33rd session in 2002, the UNSC reviewed and endorsed a new strategic framework for the ICP, including an international governance arrangement and a broad implementation plan. The 2005 ICP produced estimates of the relative price levels of GDP and its principal aggregates for 146 economies, including approximately 40 more economies than the 1993 round. This was the first time for China to participate in the ICP and the first time since 1985 that India participated. This comparison included 48 African economies, which represented more participating countries than ever before. New methods were developed and used to overcome shortcomings of the previous data collection and estimation processes.
Following its successful completion of the 2005 round, the UNSC in its 39th session in 2009 requested the World Bank to host the Global Office and take on the global program coordination of the 2011 round. The ICP 2011, with its considerably expanded coverage (from 150 to 199 countries), brought a broader acceptance compared to earlier exercises. Following their improved availability, the use of PPPs around the world has increased. In addition, the applied methodology has significantly improved over that of the 2005 round. ICP 2011 has put ICP on a firm methodological basis by introducing approaches such as the global core list and applying major technical innovations.
The 47th Session of the UNSC, held in March 2016, discussed the future of the ICP, in light of the recommendations of the Friends of the Chair group on the evaluation of the ICP 2011. The UNSC instituted the ICP as a permanent element of the global statistical work program. Starting in 2017, the program will be regularly conducted at more frequent intervals.
Please also refer to the Chronological Table on the evolution of the ICP.
The governance structure of the ICP provides an overall framework for coordinating the international, regional, and national efforts to produce reliable purchasing power parity (PPP) estimates and related measures of real expenditures.
The ICP governance framework consists of the United Nations Statistical Commission, a Governing Board, an Inter-Agency Coordination Group, Technical Advisory Group and Task Forces, a Global Implementing Agency, Regional Implementing Agencies, and National Implementing Agencies, each of which has distinct roles and responsibilities.
United Nations Statistical Commission (UNSC) is the ultimate stakeholder of the ICP, deciding the frequency and operational modality of the Program. The UNSC constitutes the ICP Governing Board, ensuring adequate representation by key countries and regional organizations.
Governing Board (GB) is a strategic and policy-making body, which sets the policies that govern the production of regional and global PPPs; approves the methodology and any methodological improvements; conducts outreach to policy-makers to ensure the inclusion of the ICP in the national permanent statistical work; and helps with fund-raising at country level to increase national funding for the ICP.
Inter-Agency Coordination Group (IACG) is a coordinating body, which collaborates on establishing timetables and work plans; develops common standards, methods, and protocols; and prepares cooperatively operational materials. The IACG consists of the World Bank as the Global Implementing Agency, the Regional Implementing Agencies, the Organization for Economic Co-operation and Development (OECD), the Statistical Office of the European Union (Eurostat), and the International Monetary Fund (IMF). The Group is convened and chaired by the World Bank.
Technical Advisory Group (TAG) is a technical body, which assures methodological soundness and overall quality of the PPP estimates; ensures transparency of the PPP estimation process; and supports the establishment of a permanent and more frequent ICP. The TAG, in collaboration with the IACG, sets forth a technical research agenda to inform future ICP comparisons, for the Governing Board’s review and approval. The TAG forms Task Forces on specific topics and invites recognized experts on the practical application of index numbers, PPPs, price statistics and national accounts to take part in them, as needed, to develop concrete proposals to address the various research agenda items.
Global Implementing Agency (GIA) supports the governance framework and undertakes the overall coordination and implementation of the ICP, including day-to-day management of the global program, convening governance meetings and other activities, and preparing and disseminating global ICP results. The World Bank, acting as the GIA, established a Global ICP Unit (GIU) to assume this role.
Regional Implementing Agencies (RIAs) coordinate and implement the regional ICP comparisons, prepare and disseminate regional ICP results, and facilitate data and information flow between the Global ICP Unit and participating countries.
Information on organizations acting as RIAs is available under Regions
National Implementing Agencies (NIAs) plan, coordinate and implement the national ICP activities, and facilitate data and information flow to and from the Regional Implementing Agency.
Information on participating countries is available under Regions
Donors financially support the implementation of the ICP. Current donors include the International Monetary Fund (IMF), the United Kingdom’s Department for International Development (DFID), Norway’s Ministry of Foreign Affairs, and Australia’s Department of Foreign Affairs and Trade.
The full set of 2011 ICP results contains data for 199 countries that participated in the ICP 2011 from these regions or economic groupings: Africa, Asia and the Pacific, the Caribbean, the Commonwealth of Independent States (CIS), Eurostat-OECD, Latin America, Western Asia, singleton economies, and the Pacific Islands. Also included are estimates for non-benchmark economies. The data covers 26 expenditures categories for goods and services, and several indicators including PPPs, expenditure shares of GDP, total and per capita expenditures in US dollar both in exchange rate terms and PPP terms, and price level indices. (ICP 2011 FAQ)
Access and archiving policy
ICP 2011 Data Access and Archiving Policy outlines the elements of 2011 ICP Data Access and Archiving Policy, as approved by the 2011 ICP Executive Board. These elements include the objectives, guiding principles, and procedures for data archiving and researcher access to underlying detailed PPPs, expenditure data and average prices.
The ICP Revision Policy summarizes and defines how ICP indicators will be revised. It describes the triggers and guidelines for revising ICP indicators, as well as the timing of revisions and the steps to be taken to communicate these revisions to users.
ICP Quality Assurance Framework
An ICP Quality Assurance Framework (ICP-QAF) was developed to ensure the quality of ICP activities and results. The first component is comprised of a body of principles that ICP operations at the country, regional, and global levels should adhere to. The aim of this framework is to introduce rigor, structure, and a common language in the assessment of the quality of microeconomic data and aggregated results and the implementation of relevant processes.
The World Bank’s DataBank: International Comparison Program (2005)
The full set of 2005 International Comparison Program results provides information on GDP, GDP per capita, household consumption, collective government consumption, and capital formation for all 146 economies. These estimates are derived from PPPs based on national surveys that priced nearly 1,000 products and services. Comparative price levels are also included.
Access and archiving policy
Archiving and Accessing ICP 2005 Results defines the ICP 2005 results to be archived by the World Bank, define the data which can be accessed by researchers, and detail the procedures necessary to obtain access. The paper also covers the data access policy as approved by the ICP 2005 Executive Board.
The ICP compares the gross domestic products (GDPs) of participating economies in real terms by removing the differences that are attributable to price levels and expressing the GDPs in a common currency. The conceptual framework of an ICP comparison is determined by the definition of GDP, which for the 2005 and 2011 rounds of the ICP was the internationally agreed-on definition of GDP in the System of National Accounts 1993 (SNA93), and SNA2008 for the current comparison cycle.
ICP comparisons of price and real expenditure levels of GDP are based on the expenditure aggregates of the national accounts using spatial price deflators or purchasing power parities (PPPs) as the measure of the price component. In these cases, the prices of products constituting final demand are collected and compared across economies to produce the price relatives, PPPs, with which the GDPs and component expenditures being compared are deflated to obtain the real expenditure relatives. In other words, the price measures are derived directly and the real expenditure measures indirectly. This is called the price approach.
The price approach is usually applied in ICP comparisons because prices are generally easier to observe directly than quantities, which are required to directly estimate real expenditures. In addition, direct measures of relative prices normally have a smaller variability than direct measures of relative quantities. Even so, the price approach is not applied in every instance. Of the exceptions, the most notable are the real expenditures for housing services, which are measured directly via the quantity approach in many economies. In such cases, PPPs are derived indirectly by dividing the real expenditures into the nominal values for the relevant aggregate(s). The direct measurement of real expenditures and the indirect measurement of PPPs are known as the quantity approach.
Each ICP comparison has a reference year, such as 2005 or 2011. The basic data that an economy participating in the comparison provides for the reference year are as follows: a set of prices for a selection of products chosen from a common basket of precisely defined goods and services, a detailed breakdown of the national expenditure according to a common classification, the economy’s exchange rates, and its resident population. The prices and expenditures are used to calculate PPPs and real expenditures (or volumes), the exchange rates and PPPs are used to calculate price level indexes, and the population totals and real expenditures are used to calculate real expenditures per capita. Prices and expenditures are reported in national currencies. Both cover the whole range of final goods and services comprising GDP as defined in the ICP expenditure classification.
Sections below provide key concepts and frameworks of ICP methodologies.
The UNSC recommended that no methodological changes be introduced for the ICP 2017 cycle, in order to maintain comparability over time and allow for producing reliable purchasing power parity (PPP) time series. However, a technical research agenda is to be established to guide the future with focus on:
A draft ICP Research Agenda was discussed by the Inter-Agency Coordination Group in 2016. The Technical Advisory Group is expected to meet in the spring of 2017 to discuss this draft and agree on a full research agenda.