-34-

Thus, for example, if only one third of country X's gross output could be matched, the final term in formula (3.5b) will take the value of 3. The dollar value of output for the entire industry is then assumed to be three times as great as the dollar value found for the covered part of the industry's output.

Equations (3.3) and (3.5) differ olily in the third term. If we compare for example (3.3b) and (3.5b), the value of covered output in country X at country U's unit values is blown up by the inverse of country U s coverage ratio according to the "quantity indicator" method, while in the "price indicator" method the blow-up factor refers to country X s coverage ratio. For (3.3a) and (3.5a) a similar statement can be made. This leads to the conclusion that the results of both methods do not differ at a1'. if the coverage ratios for both countries are the same. However, if they differ, we have to make a choice between the two methods. This problem has been rather substantially discussed in the literature on measurement of production trends since Mills first raised the issue (Mills, 1932). Burns (1934, p. 260-1) stressed that the prices of different commodities are likely to be under the general influence of "common monetary factors", whereas there is no such "single dominant force acting pervasively" on quantitative movements for different commodities. Fabricant (1940) also preferred price indicators because "prices probably move together within closer limits than do quantities". Richard Stone (1956) stated that completeness of coverage is of less importance with price indicators compared to quantity indicators, because "prices charged for close substitutes by different firms or in different parts of a country are likely, in many cases, to show similar movements even if their absolute level is a little different". We agree with the statements above. Therefore the calculations in this study are entirely based on the price indicator method. However, in tables 12 and 13 for individual industries in the Statistical Appendix we also present, pr memoria, results using the quantity indicator method.

# Levels of Real Output in 17 Industries

Our detailed analysis covered 17 industries in Brazil, Mexico and the USA. We covered a sample of 171 Brazilian product items and 372 US product items for the Brazil/USA comparison, and 192 Mexiean product items and 342 US product items for the Mexico/USA comparison, This section describes the calculation procedures, and summarizes the estimates of relative output and purchasing power parity (PPP). On the basis of these initial results we try to discern what patterns can be detected.

Table 3.1 shows total gross value of output for these 17 industries as derived from the industrial censuses, expressed in national currencies. For the United States we had to use figures for 1977 from the 1977 Census of Manufactures. For Mexico we added the gross value of output for petroleum refining, which was not presented in the industrial census, presumably - because all this output is produced by one firm PEMEX, the government monopoly. These figures were taken from from the detailed national accounts document Sistema dB Cuentas Nacionales de Mexico (1981). We deducted also indirect taxes and subsidies which were included in the Mexican census figures for malt and malt beverages, tobacco and tobacco products and petroleum refining and products (see also industries A3, A4 and All in the Statistical Appendix). Table 3.1 also shows total gross value of output of manufacturing to demonstrate the size of the sample.