Stratification of CIS–EU/OECD Economies: Predicting Effects on Endogenous Indicators

1. University of Florence, Italy U Discussion by Luigi Biggeri of the paper PPP-based Stratification of CIS–EU/OECD Economies Andrey E. Kosarev IARIW / HSE conference “Experiences and Future Challenges in Measuring Income and Wealth in CIS Countries and Eastern Europe” Moscow 17-18 September 2019

2. Very good paper : Interesting both for the Topic and the Results Obtained • Aims • Stratification of 54 quite diversified countries (CIS –EU/OECD) to obtain more structurally homogeneous subgroups of countries to better predict the effects on some endogenous indicators of the : • economic policy • increase of GDPpc on possible systemic effects of the economic policy measures • Check the validity of the stratification obtained in terms: • Harrod-Balassa-Samuelson effect (correlation between PLI and GDPpc) • Engel’s law (effect of the increase of GDPpc on the proportion of income spent for different goods and services)

3. Strengths of the paper • Data set used: very good • The ICP produced PPPs and comparable data of GDP and its components in 2005, 2011 and now is in progress the computation for 2017 • CIS-STAT computed those data also for 2014 and held negotiations with OECD and Eurostat and achieved an agreement to links CIS and EU/OECD data at BH level to obtain a separate regional comparison of PPPs and GDP for the 54 countries • Methods used: adequate to the objectives • Partially –multilateral comparison (PMC procedure) to obtain a methodologically harmonized set of PPPs to the US $ • Methods for assessing the similarity of economic structure of the countries • tendency-homogeneous. Analysis of a cross section scatter plots, and use of linear approximation • A special “moving linear segment” procedure (MLS procedure) for identifying “Structural break points”

4. Results • Allow to sub-selecting three tendency homogeneous groups • Weaker economies (low-income countries), mid-level economies (medium-income countries) and the most powerful economies (high-income countries) • Validity of the stratification obtained in terms of Harrod-Balassa-Samuelson effect and Engel’s law is confirmed (at least in general) • Few observations • The sub-division in the first two groups seems robust to different indicators used. But this do not happened for the third group of countries • The similarity in respect to the regression angles ok, but • The results depend on the indicators used and on the change in the key indicator • R and R2 are in many cases too small for good prediction of the effects • In the figures it is necessary to put the labels to better identify each country

5. Prospects and future works • Useful tool of analysis, to be used for a broader analysis; for practical solutions, it is not necessary to use very detailed categories • Replicability of the experiment: • CIS will repeats it on the basis of 2017 data that is in production • Need to extend the analyses separately for more detailed component of GDP to: • take into account the different structure of GDP • Considering that the PLI of the sub-components are different from the general PLI for GDP and are different in each country • Some sub-components of GDP (such as construction, and machinery) are more important than other to implement the development economic policies • The experiment could be extended to other groups of countries that belong to ICP comparison