5.1.8 Aggregation and final indicator construction

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Global Statistics - Composite Indices for International Comparisons

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University of Geneva

Global Statistics - Composite Indices for International Comparisons

5 notes

The number of composite indices that are constructed and used internationally is growing very fast; but whilst the complexity of quantitative techniques has increased dramatically, the education and training in this area has been dragging and lagging behind. As a consequence, these simple numbers, expected to synthesize quite complex issues, are often presented to the public and used in the political debate without proper emphasis on their intrinsic limitations and correct interpretations. In this course on global statistics, offered by the University of Geneva jointly with the ETH Zürich KOF, you will learn the general approach of constructing composite indices and some of resulting problems. We will discuss the technical properties, the internal structure (like aggregation, weighting, stability of time series), the primary data used and the variable selection methods. These concepts will be illustrated using a sample of the most popular composite indices. We will try to address not only statistical questions but also focus on the distinction between policy-, media- and paradigm-driven indicators.

À partir de la leçon

Export Potential Assessment (ITC)

This module focuses on trade indices developed by the International Trade Centre, the Export Potential Index (EDI) and the Product Diversification index (PDI). Frictions often create a gap between what a country could export and what it does export to markets around the world. Trade advisers could better address these frictions and help firms realize greater exports if they knew exactly which products and markets offer best chances. During this week, you will learn about the Export Potential Assessment (EPI and PDI), which indicates products, sectors and markets for trade development activities for over 200 countries and 4,000 products. Based upon an assessment of the exporting country’s supply capacity, the target market’s demand and tariff conditions as well as the bilateral links between the exporting country and the target market, it provides a ranking of untapped opportunities.

5.1.1 Introduction1:12

5.1.2 Global overview of the export potential assessment3:58

5.1.3 Motivation and data treatment8:40

5.1.4 Economic framework4:06

5.1.5 First dimension: the supply side7:59

5.1.6 Second dimension: the demand side5:41

5.1.7 Third dimension: the bilateral trade relations, and results4:29

5.1.8 Aggregation and final indicator construction5:50

Rencontrer les enseignants

Stefan Andreas Sperlich
Professor
GSEM, Research Center for Statistics
Juan Manuel Rodriguez Poo (in Partnership with UNIGE)
Professor
Departamento de Economía, Universidad de Cantabria

[MUSIC]

Our methodology allows us to compute the export potential indicator for

all the product that we have in our list, all exporters, and markets.

Once it is done, we select the product that we actually want to use for export

projects based on the significance or relevance of these products.

So for instance, at world level, we will require

that the export potential indicator corresponds to at least

$200,000 that could be exported to the world.

And for an individual market,

we want that the potential be at least $10,000.

If it is less than that, we consider that it's very unlikely, that it's not worth

having an export promotion activity for that particular product in this market.

For very small countries, actually this $200,000 or

$10,000 value could be already difficult to reach.

So then if it is the case, we also have a second

criterion that says that if the product is within the top

95% cumulative EPI starting from the largest products,

then we decide to keep them anyway, even if they are lower than the threshold.

Once also all this competition has been done, knowing that what we compute is

value, is a dollar value of potential, it's extremely easy to

aggregate these results at broader levels.

So initially, we have results for detailed exporter, product,

and markets, but we can compute them for broader sectors.

For exporting regions, importing markets,

importing regions and it can also be done for the world market.

And so to do that, we just add up all the values that we have

at detailed level to reach these aggregation levels.

For the degree of unused potential, we will compute,

add all the unused potentials and divide it by

the total potential to compute the aggregated level of unused potential.

In our online tool that presents results of the export potential indicator,

we have actually adopted a slightly different decomposition of the results,

to make it simpler to use and simpler to understand for most users.

So the principle is the same except that the grouping of

indicators is slightly different.

So what we compute on the supply side is the expected

market share at world level of this particular country for a product.

Then we have, on the demand side, expected total demand,

and we still have the same market access indicator.

And in between what we have is the easiness to trade

from country i, so from exporter i, to market j.

So the market share is now based on the current market share,

and we still use the growth of the off year that we explained before.

We also have the growth of the exporter relative to the world,

the expected growth of the exporter relative to world.

And finally, the global tariff conditions as before, and

this corresponds to the length of the line that is presented in the graphs,

analytical graphs presenting EPI in the tool.

For demand, we have total imports instead

of the share in total imports of a product.

And then, we still have the growth of this share and

the growth of the GDP of the importer is in the demand side.

Tariff conditions are unchanged as compared to what we presented before.

These total demand indicators

correspond to the side of the bubble in the analytical graphs.

And finally, the easiness to trade is a little similar to what we had before,

but we still have the bilateral trade

in the numerator of the fraction.

But the denominator has been slightly modified to account for

this change in the decomposition.

And this easiness to trade between country i and

j is represented by the width of the line in the analytical graph.

[MUSIC]

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