ON THE ESTIMATION OF PURCHASING POWER PARITIES ON THE BASIC HEADING LEVEL

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Abstract
The estimation procedure for purchasing power parities is generally divided into two parts, one for calculating transitive PPP's within basic headings and a second beyond this most detailed level up to gross domestic product. This paper only concerns the first step. It provides a description of the work carried out by the European Communities in 1980 within the United Nations International Comparison Project (ICP) framework. The estimated PPI's for basic headings are put forward together with the procedures for product selection and specification, the classification used for these purposes and the impact on the estimation of transitive PPP's. Instead of the country‐product dummy (CPD) method used in the ICP, a revised Elteto‐Köves‐Szulc (EKS) procedure is proposed in which the estimation method and product selection constitute one integrated procedure.

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