Definition: Input price approach

Category: Purchasing power parities

The approach used to obtain PPPs (Purchasing power parities) for non-market services. Because there are no economically significant prices with which to value the outputs of these services, national accountants follow the convention of estimating the expenditures on non-market services by summing the costs of the inputs required to produce them. PPPs for non-market services are calculated with input prices as these are the prices that are consistent with the prices underlying the estimated expenditures. In practice, prices (compensation employees) are only collected for labour which is by far the largest and most important input. http://ec.europa.eu/eurostat/product?code=KS-RA-12-023&mode=view Eurostat and Organization for Economic Cooperation and Development (OECD), "Eurostat - OECD Methodological manual on purchasing power parities (2005 Edition)", Methods and Nomenclatures, Office for Official Publications of the European Communities, Luxembourg, 2006European Union, Regulation (EC) No 1445/2007 establishing rules for the provision of basic information on PPPs, Official Journal of the European Union No L 336, 20.12.2007, p. 1 - 24