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Purchasing Power Parities for Industry Comparisons Using Weighted Elteto–Koves–Szulc (EKS) Methods
Author(s) -
Rao D. S. Prasada,
Timmer Marcel P.
Publication year - 2003
Publication title -
review of income and wealth
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.024
H-Index - 57
eISSN - 1475-4991
pISSN - 0034-6586
DOI - 10.1111/j.0034-6586.2003.00101.x
Subject(s) - weighting , econometrics , generalization , reliability (semiconductor) , economics , productivity , set (abstract data type) , statistics , purchasing power , computer science , mathematics , power (physics) , macroeconomics , medicine , mathematical analysis , physics , quantum mechanics , radiology , programming language
This study has three main objectives. First, it develops a generalization of the commonly used EKS method to multilateral price comparisons. It is shown that the EKS system can be generalized so that weights can be attached to each of the link comparisons used in the EKS computations. These weights can account for differing levels of reliability of the underlying binary comparisons. Second, various reliability measures and corresponding weighting schemes are presented and their merits discussed. Finally, these new methods are applied to an international data set of manufacturing prices from the ICOP project. Although theoretically superior, it appears that the empirical impact of the weighted EKS method is generally small compared to the unweighted EKS. It is also found that this impact is larger when it is applied at lower levels of aggregation. Finally, the importance of using sector specific PPPs in assessing relative levels of manufacturing productivity is indicated.