Producer Price Index Manual: Theory and Practice ... - METAC

Producer Price Index Manual
above this value are selected for the sample. It is a
simple means, for example, of selecting the representative
four-digit industries within a single-digit
category, or products within an establishment.
1.193 The representative sampling of establishments
and products requires comprehensive and upto-date
sampling frames. Two separate frames are
usually needed for PPI purposes, one listing the
universe of establishments and the other listing the
universe of products. Examples of possible sampling
frames for establishments are business registers,
establishment censuses, and central or local
government administrative records. When the sampling
frames contain the requisite information, it
may be possible to increase the efficiency of the
sample estimate by selecting samples of establishments
using probabilities that are proportional to
the size of some relevant economic characteristic,
such as the total value of output or sales. Sampling
frames for products are usually available from establishment
or business censuses and may be supplemented
by telephone or price survey visits.
1.194 Depending on the information available in
the sampling frame, it may be possible to group the
establishments into strata on the basis of region, in
addition to industrial activity, to form the elementary
indices. When there is information about size, a
random sample of establishments may be selected
with probabilities proportional to size. An example
of this approach is presented in Chapter 5, Section
E. Price relatives from preceding periods may further
be used as part of the sample allocation, with
larger samples being drawn from industrial groups
whose variance of price relatives is larger. All of
this increases the efficiency of the sample estimate.
It would also be possible to use cutoff sampling
procedures as a simpler, though less efficient, procedure.
Cutoff sampling, unlike random sampling,
is open to bias, if the excluded smaller establishments
have different price changes to the included
larger ones. The extent of the bias depends on the
threshold cutoff value and the level of aggregation;
some of the bias will be offsetting.
1.195 In most countries, the selection of the individual
products to be priced within the selected establishments
tends to be purposive, being specified
by the central office responsible for the PPI. The
central office draws up lists of products that are
deemed to be representative of the products within
an elementary aggregate. However, if detailed output
or sales by product are available from a census
of establishments, these data can be used to select
the sample through probability proportional to size
or cutoff sampling.
1.196 It has been argued that the purposive selection
of products is liable to introduce only a negligible
amount of sampling bias, but this may be no
more than speculation or conjecture. In principle,
random sampling is preferable, but it may not be
feasible for many countries given the additional
costs that may be involved. For example, the U.S.
Bureau of Labor Statistics and the U.K. Office of
National Statistics make extensive use of random
selection procedures to select both establishments
and products within establishments. The last stage
of sampling is to select the individual transactions
within the establishment to represent the price
movements of the selected products. Procedures for
selecting transactions are presented in Chapter 5,
Section E.3. At this level many countries consult
with an official from the establishment to select the
most representative transactions for each product.
Often selecting those with the largest volume of
output or sales does this. Such a procedure is analogous
to using cutoff sampling. It is also possible to
select a probability sample of transactions if the officials
can provide estimates of the relative importance
of the transactions.
1.197 As explained in Chapter 5, Section F, the
universe of establishments and products, from
which the sample is taken, has several dimensions.
That the universe is changing over time is a major
problem not only for PPIs but also for most other
economic statistics. Products disappear, to be replaced
by other kinds of products, and establishments
close while new ones open. This creates both
conceptual and practical problems, given that the
measurement of price changes over time requires
some continuity in the products priced. The
matched-models method requires that the price
changes recorded should refer to matched products
that are identical in both time periods, so that price
changes are not tainted by quality changes. But this
matching creates a new problem; new products and
new establishments are not introduced and the sample
deteriorates. There are further problems created
when products are no longer produced or establishments
close, and these are considered in some
detail in Chapters 7 and 8, and are outlined in sections
L.2.4, L.2.5, and M below.
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