PPPs and Real Expenditures for Dwelling Services
Estimation of PPPs for dwelling services posed formidable problems in the 2005 and 2011 rounds of the ICP. Cross-country comparisons in this area are difficult because of the varying mix between rented and owner-occupied dwellings, absence of reliable and regular rental surveys, and unreliability of housing expenditures and the absence of adequate imputation of expenditures for owner occupied housing in many countries. Consequently, methods based on rental survey data, as well as that based on the quantity or direct volume methods, were canvassed and used in the last two rounds of the ICP (Heston, 2013). However, the poor quality of rental data, housing volume indicators and housing expenditures was a major factor why the Asia-Pacific region had abandoned using data from these sources. Instead the real expenditures for that region were imputed using the reference quantity approach (ADB, 2013).
The problem with dwelling services was recognized in the FOC group report and its evaluation states:
“… Several aspects make the comparison of housing expenditures challenging, for instance, the recording of housing expenditures and the significantly varying market situations from one country to another. There were substantial efforts from the regional coordinators and the Global Office to improve the methodology as well as input data (prices as well as national accounts figures) in this complicated area; however, the actual progress was rather moderate. Most likely the dual-approach for collecting both rental and quantity data needs to be maintained. Improvements in this area should primarily come from improvements in data quality and availability (price and dwelling stock data as well as national accounts data).” (Paragraph 36, E/CN.3/2016/9, UN, 2015).
The poverty economists at the World Bank have expressed their concern with lack of reliable data on dwelling services as it is an important item in household budgets. Thus, the poverty economists are keen to see reliable PPPs and real expenditures for dwelling services in the 2017 ICP.
The Global ICP Unit is making special effort to improve quality of data on dwelling services and identified the following items for immediate attention:
- Assess the quality of housing input data;
- Recommend additional housing quality indicators for data collection, where possible;
- Propose imputation techniques in cases of missing housing data;
- Suggest refinements and improvements to the existing methods for housing estimates to better account for quality differences; and
- Investigate the use of new methods for estimating housing expenditures, such as the user cost approach.
The Global ICP Unit hopes to significantly improve dwellings estimates for inclusion in the 2017 comparison cycle.