This paper reviews the International Comparison Program (ICP), a worldwide effort to produce international comparisons of real GDP and its components and purchasing power parities of currencies (PPPs). The robustness of results and future work are considered.
A generous estimate of margins of uncertainty in the benchmark estimates might be 20-25 per cent for low-income countries and 7 per cent for high-income countries. The errors in extrapolations to countries not covered by the surveys could go as high as 30-35 per cent. That is still a small range of error compared to that stemming from the use of exchange rates to convert own-currency to common currency measures of output. Furthermore, exchange rate conversions are even more sensitive to methodology than PPP conversions. The notion that exchange comparisons rest on a simple and transparent procedure using standard market data is illusory. The future of ICP measures seems assured in Europe, particularly in the European Community. The prospects for systematic worldwide comparisons do not look as bright. A renewed effort by the United Nations Statistical Office and the World Bank would be needed to maintain an ICP with comprehensive coverage and comparable methods in all major regions.
*Published: This paper was subsequently published as The International Comparison Program: Current Status and Problems, Irving B. Kravis, Robert E. Lipsey, in NBER book International Economic Transactions: Issues in Measurement and Empirical Research (1991)
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