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On the Reliability of Unit Value Ratios in International Comparisons

Author

Listed:
  • Timmer, Marcel P.

    (Groningen University)

Abstract

In this paper reliability indicators are developed for the Laspeyres and Paasche index type currency conversion factors used in the industry of origin approach to international comparisons of output. Given the fact that these conversion factors are calculated on basis of a sampling technique, sampling theory is used to develop formulae for standard errors. A comparison with the stochastic approach to index numbers is made. Empirical evidence for five bilateral comparisons in manufacturing shows that reliability differs as both sample coverage and the degree of price variability play a role. Ninety percent confidence intervals for the total manufacturing Laspeyres and Paasche unit value ratios ranged from ± 4% to ± 11% for the comparisons involving high productivity countries only, and up to ± 27% in a comparison of a low and a high productivity country. At branch level the differences are even more pronounced but no particularly (un)reliable branches could be discerned. Another issue addressed in this paper is whether products should be grouped together before estimation of the indices. Stratified sampling theory suggests that if the grouping is carried out properly, more precise estimates can be obtained. Guidelines for this intermediate grouping are given. Empirical evidence suggests that the grouping of products into four digit ISIC industries improves the estimation of the aggregate indices.

Suggested Citation

  • Timmer, Marcel P., 1996. "On the Reliability of Unit Value Ratios in International Comparisons," GGDC Research Memorandum 199631, Groningen Growth and Development Centre, University of Groningen.
    • Handle: RePEc:gro:rugggd:199631
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    File URL: http://irs.ub.rug.nl/ppn/316190470
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    Citations

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    Cited by:

    1. Thomas von Brasch & Ådne Cappelen & Diana-Cristina Iancu, 2015. "Understanding the productivity slowdown. The importance of entry and exit of workers," Discussion Papers 818, Statistics Norway, Research Department.
    2. Diewert W.Erwin & Lippe Peter von der, 2010. "Notes on Unit Value Index Bias," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 230(6), pages 690-708, December.
    3. repec:dgr:rugggd:200362 is not listed on IDEAS
    4. Szirmai, Adam & Ren, Ruoen & Bai, Manyin, 2005. "Chinese Manufacturing Performance in Comparative Perspective, 1980-2002," Center Discussion Papers 28525, Yale University, Economic Growth Center.
    5. Szirmai, Adam & Yamfwa, Francis & Lwamba, Chibwe, 2002. "Zambian manufacturing performance in comparative perspective," GGDC Research Memorandum 200253, Groningen Growth and Development Centre, University of Groningen.
    6. Müller, Gerald, 1999. "Smaller Productivity Gap Between German Regions When Different Producer Prices are Taken into Account," IWH Discussion Papers 89/1999, Halle Institute for Economic Research (IWH).
    7. repec:dgr:rugccs:199919 is not listed on IDEAS
    8. repec:dgr:rugsom:03c20 is not listed on IDEAS
    9. repec:dgr:rugggd:200258 is not listed on IDEAS
    10. repec:dgr:rugggd:200251 is not listed on IDEAS
    11. repec:dgr:rugggd:200259 is not listed on IDEAS
    12. Timmer, Marcel P., 1999. "Climbing the Technology Ladder Too Fast? An International Comparison of Productivity in South and East- Asian Manufacturing, 1963-1993," Working Papers 99.2, Eindhoven Center for Innovation Studies.
    13. Prins, M. & Schulte, W., 2002. "Tanzanian manufacturing performance in comparative perspective," GGDC Research Memorandum 200259, Groningen Growth and Development Centre, University of Groningen.
    14. Michiel VAN Dijk, 2003. "South African Manufacturing Performance In International Perspective 1970–1999," South African Journal of Economics, Economic Society of South Africa, vol. 71(1), pages 119-142, March.
    15. repec:dgr:rugggd:200253 is not listed on IDEAS
    16. Ark, Bart van & Timmer, Marcel & Inklaar, Robert, 2002. "The Canada-U.S. manufacturing productivity gap revisited: new ICOP results," GGDC Research Memorandum 200251, Groningen Growth and Development Centre, University of Groningen.

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