The International Comparison Project as a Source of Private Consumption Data for a Global input-Output Model

In 1989 a major project entitled "Strategies for Environmentally Sound Economic Decelopment" was inaugurated under the sponsorship of the United Nations. This project is designed to identify ways of alleviating pressures on the global environment and, at the same time, raise the standard of living of the poorest countries. The central component of its analytical framework is a dynamic global input-output model (GIOM) that describes trade between 15 regions in about 50 commodities, taking as its starting point the well known 1977 World Input-Output Model of Leontief, Carter and Petri. The purpose of the present paper is twofold. Firstly, it describes a contribution to the compilation of a database for the GIOM. In particular, it draws on data collected by the United Nations' International Comparison Project (ICP) to provide estimates of private consumption expenditure for 1980, the base period for the model. Secondly, it uses these estimates as a case study to examine the implications of using different price systems for each country, rather than a common set of prices, to determine expenditures on composite commodities. In preparing data for multisectoral global models, it is common practice to collect expenditure data evaluated in local (national) prices and convert to world prices using published exchange rates. The analysis of this paper suggests that, when commodities produced in different countries are treated as perfect substitutes in the model, the practice may seriously compromise the model's results.