Research Agenda for the 2011 ICP Round – Priority List Prepared by the Chair of the Interim Technical Advisory Group (ITAG) for Discussion at the Interim Executive Board Meeting on October 24, 2008

2 Background to Report Consultations with ITAG began in July Response enthusiastic but no convergence on 3 interdependent ring related concepts:  Core and overlap items  Representativity  National average prices Drafts and redrafts produced the distributed report and its conclusions

3 Core and Overlap Items a seemingly straight-forward idea:  Eurostat in 2005 organized meetings into Northern, Central and Southern Groups of their 31 Countries with Finland, Austria and Portugal as the group leaders  Begin with a non-compulsory list of items  Groups respond with items they find representative whether or not on list  Items Overlapping at least 2 of the country groups become the final items compared across groups  Can the model be applied globally? Interdependent Issues

4 Some Questions on the Core-Overlap Approach-Representativity Representativity - an EU-OECD operational concept that did not export well in 2005 and was not used Can countries within Regions, whether in subgroups or not, agree on enough representative overlapping items to link countries? What is the sequence?  Starter lists for the world and for each region?  Revised core list…All representative?  How many countries/sub-regions/regions need price an item (what is the necessary overlap) to designate at item as core?

5 Because expenditures embody national average prices, conceptually the ICP has sought to collect national average prices In practice, countries mostly collect prices from CPI Outlets that are mainly urban, which raises questions  What if the urban outlets do not represent the spatial distribution of prices in a country?  If new outlets are introduced will they be representative? Of non-CPI-sampled areas? Of qualities of goods that are representative?  Should we record other price-determining characteristics of an item along with its price? National Prices and Urban Pricing and Use of CPI Outlets

6 In order for Eurostat to implement the linking across its groups countries must supply their prices to Eurostat Should other Regions move to sub-regional comparisons, the Coordinating Office would need country prices Likewise for the Global Office to carry out linking across the regions they must have item prices from a ‘suitable’ number of countries, where ‘suitable’ has to be defined. For this to happen there must be agreement from the start of ICP 2011 by a sufficient number of countries from each region. Is a fall-back position necessary? What would it be? Organization Issues and the Core Item Proposal

7 Construction:  The BOCC approach to construction imposed an additional burden on the Ring countries of the OECD because they use the Bills of Quantities approach  The OECD may slightly modify the BofQ in 2011 but there will remain some important differences to be resolved Education:  The non-comparability in treatment of education and government consumption expenditures between the regions in 2005 needs to be addressed  The OECD will adopt a different treatment of education for 2011 based on students. Is this approach feasible for the ICP in other regions? Achieving Common Methodology for Construction and Non-priced Services

8 Expenditure Reviews  Possible changes in number of Basic Headings  Review of 2005 results to flag BHs that display unlikely patterns across counties, like housing Rental Services  Large differences in expenditure shares need regional discussion  Problems that non-comparable expenditure estimates raise for estimating of real quantities  Further the market rent, quantity and synthetic approaches to PPP estimates need to be improved and made consistent with expenditures Expenditures and Market and Imputed Rental Services

9 Provision of error estimates for aggregate estimates Issues in linking within regions and between regions of different sizes Aggregation issues including treatment of exports and imports Some Less Immediate Priorities

10 Poverty PPPs and the ICP Analysis of the 2005 benchmark PPPs in terms of estimating PPPPs is ongoing Important finding is that there are large differences between HH surveys and the national accounts expenditures of the ICP Needs of the poverty program primarily requires parallel planning

11 The ITAG sees the Core Item- Representativity-National Average Price Nexus as 1st priority Comparable Regional Methods for non- priced services and construction is a close second The ITAG strongly recommends that a technical group be convened asap to provide an initial framework for 2011 We now seek the views of the Executive Board on these priorities and the recommendation to convene a meeting Wrap Up