Purchasing Power Parities and the Size of World Economies: Results from the 2017 International Comparison Program

Most comparisons of construction industry performance requirethat construction costs be converted to a common base. Existingmechanisms for such conversions produce unreliable results.A proposed method for producing industry-specifi c conversionfactors was tested using a single building type. A basket ofmaterials and labour was identifi ed and weighted to refl ect the costshare of each item in a completed project. Prices for the basketwere gathered in three cities and simple construction specifi cconversion indices were calculated based on the constructionpurchasing power of each currency. The construction purchasingpower parities (CPPPs) showed marked differences from otheravailable conversion mechanisms such as exchange rates andgeneral purchasing power parities (PPPs) that have been used inprevious international comparison studies. While the study waslimited in scope, and is only the fi rst stage of a longer process, thesubstantial differences in comparative costs based on purchasingpower illustrate the problems inherent in international costcomparisons. For example, comparing Singapore and Sydney,Singapore costs appear to be only 40% of those in Sydney (basedon exchange rates) about two-thirds the cost of Sydney (usinggeneral PPPs) or almost the same (using the preliminary CPPPs).These results illustrate the problems of converting costs fromlocal currencies to a single base currency and suggest that furtherdevelopment is needed to improve the reliability of outcomes.

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On the Global International Comparison of GDP for Reference Year 2017

Voprosy statistiki ◽

10.34023/2313-6383-2021-28-1-80-87 ◽

2021 ◽

Vol 28 (1) ◽

pp. 80-87

Author(s):

Yu. N. Ivanov ◽

T. A. Khomenko

Keyword(s):

International Comparison ◽

World Bank ◽

The Body ◽

Purchasing Power ◽

Project Coordinator ◽

The World Bank ◽

Standards Of Living ◽

The World ◽

The Government ◽

Purchasing Power Parities

The article outlines main results of global international comparison of GDP on purchasing power parities (PPPs) for 2017 published by the World Bank in July 2020. This comparison is the project of international statistics, which secures unique data on the world economy, on the place of countries in the world and regional economies, on standards of living in different countries, on differences between purchasing power parities and exchange rates, and so forth. These data are of interest to the government in relation to the development of economic policy. This comparison required collaboration between the World Bank as the overall project coordinator, regional coordinators and statistical offices producing baseline data on GDP in national currency.In the body of the article, the authors consistently consider the following issues: the basic methodology used in the International Comparison Program, main ﬁndings, limitations and the degree of reliability of the results of the international global comparisons. In this context issues of methodology of comparison and features of direct binary and multilateral comparisons are considered, in particular the formula for the computation of PPPs, which ensures transitivity (mutual consistency of results).The article concludes by emphasizing the multifaceted tasks of the International Comparison Program based on purchasing power parities, led by the World Bank.

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