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8th Ottawa Group Meeting on Price Indices Helsinki - August 2004

Topics

Topics for the 2004 meeting

Topic 1: Price indices for services

Topic 2: Relationships between consumer price indices and other statistical systems

Topic 3: Housing

Topic 4: Quality control of price index production processes

Topic 5: Other issues

TOPICS FOR THE 2004 MEETING

Services are accounting for an increasingly greater share of consumer expenditures. However, research on the price index number problems specific to services has been rather limited. The last two meetings of the Ottawa group have focussed on important areas of services and resulted in a number of interesting papers, illustrating various and difficult problems. With respect to the Helsinki meeting, price indices for services continue to be one of the key topics for the meeting. Specific attention is paid to housing services.

The remit of the Ottawa group states that the focus of the Group is particularly, though not exclusively, in the area of consumer price indices. The development of producer price indices for services will bring the field of producer price indices closer to CPI's which should provide greater opportunities for integration of methods and practices. Also emerging user needs for international price level comparisons give a reason to analyse the opportunities for integration between the different systems of price statistics. The use of CPI and PPI sub-indices in the deflation of aggregates in the national accounts also suggests a need to analyse CPI in relation to other statistical systems.

For less complex statistical systems there exists a set of generally accepted quality measures like non-response rates and statistical variance estimators. The CPI and other price indices are relatively complex systems compiled using several types of statistical samples and a rather complex production process. There do not exist any common standards for the quality assessment of price indices . The fourth topic in the agenda of Helsinki meeting is addressed to the issues on quality control and processing arrangements of the price indices.

Topic 1: Price indices for services

The last two meetings of the Ottawa group have focussed on important areas of services: telecommunications, financial services, health and social services. Despite this, price indices for services should remain on the agenda of the Ottawa Group. In particular, research papers relating to following topics are considered as important:

Health care (medical products, services of physicians, dentists, hospital services) is probably one of the most difficult areas for the compilation of price indexes. A great part of these activities, which may substantially vary from one country to another, is subsidised and products may be charged in different ways. The appropriate treatment depends on the aim of the CPI and is an issue for international comparison.

Another important issue is the nature of commodities to be priced: should we price inputs, like other products, in separate categories according to a detailed classification of products or should we price outputs (expenditure required to reach a defined level of efficiency in treating a pathology) or outcomes (expenditure required to reach a defined level in the standard of living, like life expectancy)? Even with the first option, which is the easiest to implement, a lot of difficulties remain. One of them is to get enough information to calculate weights at a detailed level; another is dealing with quality adjustment, particularly when new products appear on the market and when substitution occurs between products rendering the same services (e.g. generic versus original drugs).

Financial services (including insurance): A specific feature of financial services is their complexity (identifying the transaction unit is not obvious), their various way of charging (by individual transaction, package or a mix of them) and their scope which potentially goes further than the traditional concept of consumption expenditure (as indirect charges associated with deposit and loan facilities).

One classic problem is the consistency between statistical treatment of insurance expenditure and direct expenditure incurred by consumers on the items being insured. Quality adjustment, especially when excesses or cover values are modified is a second one. The third one affects health insurance: in particular, how to treat insurance financed by government or employer (compulsory or not) contributions.

Gambling: private expenditure on gambling is in many countries quite significant. According to international standards, gambling should be included into the consumer price indices. Despite this, gambling has been in several countries omitted from the scope of the CPI. Reasons for this may be partly practical, stemming from the fact that price measurement of gambling gives rise to same kind of problems as the pricing of insurance services. The review of different theoretical options and practical experiences for the price index for gambling would therefore be important.

Topic 2: Relationships between consumer price indices and other statistical systems

The remit of the Ottawa Group states, that the focus of the Group is particularly, though not exclusively, in the area of consumer price indices. The development of producer price indices for services will bring the field of producer price indices closer to CPI's which should provide greater opportunities for integration of methods and practices.

The second issue relevant for this topic is more widespread production of spatial price comparisons (like purchasing power parities) which seldom are dealt with in the context of CPI's despite the evident connecting points.

The use of CPI and PPI sub-indices in the deflation of aggregates in the national accounts also suggests a need to analyse CPI in relation to other statistical systems.

Topic 3: Housing

The weight of housing services - owner occupied housing and rental markets - is very significant in most CPI's. More importantly, housing services are probably the most important source of incomparability in cross-country comparisons due to quite different conceptual and practical solutions for the measurement of prices and expeniture on owner occupied housing.

On a more technical level, the complexity of the housing market presents a number of challenges for index compilation, especially in relation to making appropriate adjustments for changes in quality. This applies both to owner occupied housing and rental markets.

Topic 4: Quality control of price index production processes

Consumer price indices are relatively complex statistical systems that are compiled using a variety of data sources and differing sampling strategies. In less complex statistical systems there often exists some generally accepted measures like non-response rates and statistical variance estimators to monitor bias and statistical accuracy of the results. In the case of price indices, quality assurance is more difficult. The results of any work in developing systematic approaches for producing quality measures for price indices would be welcomed.

The compilation of price indices often involves the processing of a considerable number of individual price observations. The decisions relating to data processing and validation are always to some extent automated, i.e. based on some pre-defined algorithms. The degree of process automation is known to vary across countries and across individual price indices. Increasing the degree of automation has the potential to reduce costs, but may increase the risk of introducing systematic biases. A useful starting point for considering these issues would be to collate a systematic account of existing automated practices and statistical methods for risk assessment related to automated procedures.

Topic 5: Other issues

Limited time is available for papers on other issues within the terms of reference of the Ottawa Group. Especially welcome are papers dealing with issues which are likely to figure on the agenda of forthcoming meetings of the Group.


Last Updated 16.2.2004

Contact information:

Mari Ylä-Jarkko
Phone +358 9 1734 3310
Fax +358 9 1734 3562
e-mail: mari.yla-jarkko@stat.fi

Timo Koskimäki
Phone +358 9 1734 3479
Fax +358 9 1734 3562
e-mail: timo.koskimaki@stat.fi



 

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