Economies participating in the International Comparison Program (ICP) collect prices for a selection of the goods and services that make up final consumption expenditure and gross capital formation. There are four main surveys:
- Household consumption
- Government consumption
- Machinery and equipment
- Construction and civil engineering
For each of these surveys there is a global core list (GCL) of items, prepared in consultation with regional and national implementing agencies and based on the GCL list of previous ICP cycles to maintain temporal comparability. In addition, each region develops its own list of regional items for the regional comparison, which includes region-specific items representative of the consumption pattern in the region, as well as GCL items needed for linking the regional results into a global set of results.
All prices reported are national annual average prices, in local currency, for the reference year—that is, they should be the average of the prices collected at regular intervals throughout the year. When price surveys are conducted outside the reference year, prices are retropolated or extrapolated using the consumer price index (CPI).
The household consumption survey covers the largest expenditure share, accounting for more than 60 percent of gross domestic product (GDP) in the majority of economies. It includes a wide assortment of goods and services purchased by households for individual consumption. This survey also includes two additional surveys that are treated separately due to different data requirements; these are the private education and housing surveys.
Main household consumption survey collects prices for a wide range of goods and services for household consumption such as food, beverages, tobacco, clothing, footwear, utilities, furniture, household appliances, pharmaceuticals, private health care services, motor vehicles, transportation services, electronic equipment, communication services, catering services, accommodation services, recreational activities, personal hygiene, and other goods and services. For this survey, each economy classifies the items priced as important or less important for the consumption patterns of its inhabitants.
Private education survey collects annual tuition prices for private education institutions at the primary, secondary, and tertiary levels as well as other education services, such as foreign language and private tutoring.
Housing survey collects annual rental prices or dwelling stock data for housing services. Rental prices are collected for similar dwelling types in each economy. This approach has been found to work well in economies in which the dwellings actually rented are representative of the stock of dwellings as a whole and where statistical agencies collect information on rents paid for the different kinds of dwellings that are rented in most parts of the economy. Dwelling stock data is collected for both the quantity and quality of the dwelling stock.
Government consumption survey compiles administrative or survey data on the compensation of public employees in a variety of collective services, public health services, and public education services. The selection of government occupations represents the various education and skills levels that are commonly found among employees working in these three government sectors.
Collected data reflect the basic salary or wage, allowances and cash payments over and above the basic salary or wage, income in kind, and the employer’s actual and imputed social security contribution. The sources of the data reported are the administrative government pay scales for each of the selected occupations or dedicated surveys on the compensation of government employees. The GCL defines these occupations using job descriptions taken from the International Labour Organization’s (ILO) International Standard Classification of Occupations 2008.
Gross fixed capital formation: Machinery and equipment
Machinery and equipment survey collects on a list of industrial, transportation, and electronic items commonly used in a variety of industries for the production of goods and services. The GCL includes one item identified by brand and model and another generic item with the exact same characteristics, but not identified by brand and model. For consistency with national accounts, prices for equipment goods that are consistent with the valuation of those goods as fixed capital assets in the national accounts are required. Thus the prices must include the import duties and other taxes actually paid by the purchaser, the costs of transporting the asset to the place where it will be used, and any charges for installing the asset so that it will be ready for use in production. Deducted from the price are the discounts generally available to most purchasers.
Gross fixed capital formation: Construction and civil engineering
Construction and civil engineering survey collects prices for inputs to construction work, including materials, equipment hire, and labor. The prices provided are those paid by construction contractors to their suppliers. For materials, these are typically the prices paid, after discounts, to manufacturers or intermediaries (agents or merchants), including all nonrecoverable taxes and excluding all recoverable taxes such as a value added tax. For equipment, prices are the rental charges paid to hire companies or internal hire rates. For labor, these reflect the cost to the contractor of employing workers. In addition, resource weights for each input component (materials, equipment hire, labor) for typical residential, nonresidential, and civil engineering projects are collected.
Price data validation
Validation procedures are an iterative process carried out at the national, regional, and global levels to ensure data quality and comparability across all participating economies.
The validation process comprises three distinct stages. The first is the intra-country or national validation stage, during which the prices collected by a single economy are edited and verified. The second is the inter-country or regional validation stage, during which the prices collected by all economies participating in a regional comparison are edited and verified. The third is the inter-regional, or global, validation stage, during which the prices that have been collected for global core items from the GCL and have already been edited and verified within regions during the intercountry validation are edited and verified across all economies and all regions.
This process is repeated over several rounds, since changes and revisions to price data from one economy impact the PPPs calculated for all other economies. Once errors are found and corrected, overall results need to be recalculated and a new validation round begins. The new results, once cleared of major errors, may reveal mistakes that were not previously detected. This process repeats itself until the final price data are deemed reliable.
It should be stressed that validation procedures are complementary to good survey practices. Data quality depends to a large extent on the design and management of each price survey. Price collections must be planned carefully, carried out efficiently, and supervised properly. Item specifications must be sufficiently detailed to enable price collectors to identify items unambiguously in the outlets they visit. Any difficulties arising with each price survey should be documented and reflected in the design and conduct of future surveys.
- Measuring the Real Size of the World Economy: The Framework, Methodology, and Results of the International Comparison Program
- Operational Guidelines and Procedures for Measuring the Real Size of the World Economy
- Purchasing Power Parities and the Size of World Economies - Results from the 2017 International Comparison Program