Microeconomic Approaches to the Theory of International Comparisons

The paper considers alternative approaches to providing consistent multilateral indexes of real output, real input, real consumption or productivity across many regions, countries or industries at one point in time. The recommended approaches are based on aggregating up various bilateral indexes which in turn are based on the economic theory of index numbers, either in the producer or consumer theory context. In order to distinguish between various competing multilateral approaches, an axiomatic or test approach to multilateral comparisons is developed. This test approach indicates that the Geary-Khamis and Van Yzeren approaches to multilateral output comparisons are dominated by the (new) own share and the Elteto-Koves-Szulc methods.