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Development of expenditure weights for aggregating primary price data

Detailed expenditure data were needed to develop weights for aggregating primary price data.  Absence of good weights would have resulted in poor quality PPP estimates. Basic Headings represented the most detailed expenditure estimates covering groups of homogenous products. The responsibility for providing the expenditure estimates according to the desired classification lied, in principle, with each country’s national statistical office.  For most developing countries the GDP numbers were calculated from the output side. Expenditure estimates were weak and often built with household consumption calculated as a residual, even though it accounted for approximately two-thirds of GDP. Many developing countries lack the capacity to collect basic data essential for the preparation of a complete set of national accounts.

From the perspective of the ICP, a key and critical requirement was that countries take steps to improve their national accounts. Therefore, the first priority was to have a clear strategy for improving the availability of basic national accounts data, along with a refinement of the system of price collection with ICP requirements more closely integrated. The first priority of the research in this area was to develop a general framework, and also concrete and step-by-step guidelines to help countries produce the required expenditure weight data for previous ICP round. This research drew on national accounts data as well as household survey data. 

As part of this effort, a World Bank household expenditure survey database was developed. The idea was to facilitate the adoption of such measures in the production of standardized, reliable and timely regional national accounts statistics. The preference for greater detail of expenditure provided more scope to improve the reliability of the national account estimates. The extra effort required to develop the additional details of GDP expenditures is also commensurate with long-term data quality improvement objectives.



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