Multilateral comparisons in the ICOP project : issues, methods and empirical results

This paper examines the feasibility of constructing a consistent set of multilateral comparisons of manufacturing sector output and productivity within the framework of the ICOP project. A major objective of the paper is to construct truly multilateral comparisons using the existing data base of the ICOP project. This data base consists of data constructed essentially on the basis of detailed bilateral comparisons. Multilateral unit value ratios are built up from the lowest level possible (the product level). The second objective of the paper is to examine in-depth the problem of aggregation of unit value ratios. Various aggregation methods, both well-known methods and new ones, are applied and sensitivity of the results is examined. New multilateral aggregation methods are developed which take into account differences in number of matches of the underlying binary comparisons, as well as the Laspeyres-Paasche spread which is considered to be a general indicator of reliability. Finally, the paper presents empirical results derived from the application of the above procedures to data for eight countries for the 1987 benchmark year.