Eurostat, the statistical office of the European Union

C.3. : Statistics for administrative purposes

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Correction coefficients (countries) are used to ensure equality of purchasing power of remuneration between different locations within the European Union and Belgium.

Correction coefficients are calculated as the ratio between the "economic parity" and the exchange rate to the Euro (where applicable). They operate as a percentage adjustment to remuneration expressed in local currency.

As the correction coefficient is simply the economic parity divided by the exchange rate, it can be seen that the exchange rate effect cancels out and the economic parity is the appropriate conversion rate to convert amounts expressed in local currency into Euro and eliminate the effect of price level differences.

The economic parity tells us how many currency units a given quantity of goods and services costs in different countries.

The method used to establish economic parities is to compare the price of a basket of goods and services purchased by the average retired international official in Belgium with the price of an equivalent basket of goods and services purchased by the average retired international official in each of the other countries.

To compile these prices, Eurostat carries out a number of detailed price surveys in cooperation with national statistical institutes. The same source data is used as for the similar exercise to establish correction coefficients for active staff in Intra-EU duty stations (see prc_colc_tot), however it is processed separately.

For each item, the price ratio with Belgium is computed. Similar items are grouped into "basic headings", and a geometric mean of the price ratios is calculated to establish a basic heading parity. These basic heading parities are then aggregated to produce an overall parity. This aggregate is computed as a weighted arithmetic mean, using consumption expenditure pattern of retired international officials as weights.

The tables presented here show correction coefficients for countries at the level of the overall aggregate (ie. total consumption) and as the total excluding rents.

Information at more detailed level is published in the Annual Remuneration Report.

The overall list of products and services priced in the detailed surveys contains about 3000 items. These items are classified according to the standard "Classification Of Individual COnsumption by Purpose" (COICOP), which has been adopted as a national accounts classification for consumer expenditure since 1999 and is also used for the Harmonised Index of Consumer Prices (HICP).

According to COICOP, goods and services are broken down into 12 main groups, each of which is broken down into sub-groups, which in turn are broken down into more detailed groups.

For the calculation of correction coefficients, the classification comprises 80 basic headings. The basic heading is the lowest level of aggregation, at which products are sampled and product prices collected. Below the basic heading level are the individual items of the product sample. For example, cheese is a basic heading and cheddar, camembert, feta, gorgonzola, gouda, etc. are individual products within it.

Correction coefficients are calculated to adjust the pensions of retired international officials but may also be suitable for other uses.

See also section 18.1

a) Bilateral economic parities

In their simplest form economic parities are price relatives that show the ratio of the prices in national currencies of the same good or service in different countries. For example, if the price of a hamburger in Belgium is 3.11 Euros and in Denmark the price is 30.57 Krone, then the parity for hamburgers between Denmark and Belgium is 30.57 Krone to 3.11 Euros, or 9.830 Krone to the Euro. This means that for every Euro spent on hamburgers in Belgium, 9.830 Krone would have to be spent in Denmark to obtain the same quantity and quality - or, in other words, the same volume - of hamburgers.

If hamburgers were the only item of consumption in the basket of goods and services, then to ensure equivalent purchasing power of the Euro pension of a Belgium-based retired international official when living in Denmark, the pension should either be converted into Krone using the economic parity directly - or the pension should be multiplied by the exchange rate between the Euro and the Krone and then multiplied by the correction coefficient.

In practice the parity at the level of the overall aggregate refers to a complex assortment of goods and services. Thus, if the total parity (ie. the parity for total consumption) between Denmark and Belgium is 9.830 Krone to the Euro, it can be inferred that for every Euro received and spent in Belgium, 9.830 Krone would have to be spent in Denmark to purchase the same volume of goods and services. Purchasing the same volume of goods and services does not mean that baskets of goods and services will necessarily be exactly identical in both countries. The exact composition of the baskets will vary to reflect differences in tastes and cultural backgrounds, but both baskets will, in principle, provide equivalent satisfaction or utility.

b) Consumer goods and services

Survey price data is compiled in accordance with Regulation 1445/2007 and the Eurostat-OECD manual on purchasing power parities.

Updating indices (the Harmonised Index of Consumer Prices) are obtained from national statistical institutes.

This is the same source data as used for the similar exercise to establish correction coefficients for active staff in Intra-EU duty stations, however it is processed separately.

c) Housing

Housing costs are treated differently from other prices mainly for two reasons:

• They are typically the largest single item of expenditure in the basket (at least 20-25% of total consumption)
• Housing is different from other consumer goods and services because no two dwellings are exactly alike, especially when taking into account all secondary attributes which have an impact on price such as location, infrastructure, etc.

For this reason, a six year moving average model is implemented, for which specific rent surveys are conducted annually by national statistical institutes in cooperation with Eurostat and other international organisations.

The same source data is used as for the similar exercise to establish correction coefficients for active staff in Intra-EU duty stations, however it is processed separately. In particular, an additional adjustment is made to reflect the difference in price level between the capital city and the country as a whole.

d) Education and Healthcare

Member States have developed different delivery systems for these services, and there is typically special treatment of such expenditures for international officials because the needs of expatriates can vary from those of the national population. For this reason, a specific methodology is implemented, involving direct surveys. The same source data is used as for the similar exercise to establish correction coefficients for active staff in Intra-EU duty stations, however it is processed separately.

e) Consumption expenditure patterns

These are established on the basis of direct household expenditure surveys ("family budget surveys") conducted at periodic intervals amongst retired international officials. The average result for each country is established as the consumption pattern until the next survey. Where the population of retired international officials is particularly small or mobile or response rates are particularly low, such that a reliable structure cannot be established, a regional pool weight may instead be applied.

Correction coefficients (countries) are established for the specific Member State.

The classification of retail outlets used in the European Comparison Programme applies for pricing purposes.

For dwellings the specific classification developed for the moving average model applies; prices are compiled from real estate agencies.

For consumption expenditure patterns, the households of individual retired international officials.

Pricing samples are selected from the full market of goods and services.

Consumption expenditure survey participants are selected from the total population of retired international officials.

Correction coefficients (countries) are established for each of the EU member states.

However, no correction coefficient is established for Luxembourg as, in accordance with the Staff Regulations, the price level is deemed equal to that in Belgium.

Correction coefficients (countries) are presented in the tables with effect from 2004. Before 2004, the same correction coefficient was applied for pensions of retired international officials as the one applied to remuneration of active officials.

Not applicable.

Correction coefficients (countries) are expressed as a percentage.

The correction coefficients are the mathematical ratio between the economic parity and the exchange rate. Parities and exchange rates express the number of currency units per Euro.

Correction coefficients (countries) are updated yearly with reference to June (1^st July).

A second calculation with reference to December (1^st January) is done to identify any countries where the movement since the preceding June exceeds a threshold specified in the Staff Regulations.

Article 64 and Annex XI of the Staff Regulations (Council Regulation EEC, Euratom, ECSC No 259/68 of 29 February 1968) as subsequently amended. Important amendments during the period for which time series data is presented in the tables include :

• Legislation 1991-2003 (Council Regulation No 3830/1991)
• Legislation 2004-2012  (Council Regulation No 723/2004)
• Legislation 2013-  (Council Regulation No 1023/2013)

Common rules for the provision of basic information (input data), the calculation and dissemination of parities are laid down in Regulation EC No 1445/2007 of the European Parliament and of the Council of 11 December 2007.

With effect from 2014 the European Statistics Code of Practice applies for work on correction coefficients. It sets the standard for developing, producing and disseminating European statistics, building upon a common definition of quality in statistics.

Specific methodologies and publication policies are decided by the Expert Working Group on Articles 64 & 65 of the Staff Regulations which meets annually in Luxembourg.

The input data is compiled and validated in collaboration with national statistical institutes with the exception of some data collection to establish the education parity, and periodic surveys of household consumption expenditure ("family budget surveys") amongst retired international officials.

The information compiled by Eurostat may be shared with partner organisations including the International Service for Remunerations and Pensions of the Coordinated Organisations (NATO, OECD, CoE, ESA, ECMWF, METSAT) and the United Nations International Civil Service Commission under the terms of an international memorandum of understanding signed in 2009.

Regulation (EC) No 223/2009 on European statistics (recital 24 and Article 20(4)) of 11 March 2009 (OJ L 87, p. 164), stipulates the need to establish common principles and guidelines ensuring the confidentiality of data used for the production of European statistics and the access to those confidential data with due account for technical developments and the requirements of users in a democratic society.

The correction coefficients calculation exercise is a multilateral statistical undertaking, in which the quality of each country's results is depending on all the other participating countries as well as on its own data. It is therefore important that input data is available for validation purposes to all participating national statistical institutes. However, only average prices and selected additional information per country are made available for the calculation of correction coefficients, not the entire price material as collected by each national statistical institute.

Information compiled during household surveys is strictly anonymous.

No release calendar

not available

In line with the Community legal framework and the European Statistics Code of Practice Eurostat disseminates European statistics on Eurostat's website (see item 10 - 'Accessibility and clarity') respecting professional independence and in an objective, professional and transparent manner in which all users are treated equitably. The detailed arrangements are governed by the Eurostat protocol on impartial access to Eurostat data for users.

Yearly

Following transmission of the Eurostat Annual Remuneration Report, and completion of internal administrative procedures, the Commission publishes a summary in the Official Journal of the European Union.

In accordance with the Staff Regulations, an Annual Remuneration Report is prepared by 31st 

October each year, including the update figures for correction coefficients (countries) as at June (1st July).

An Intermediate Remuneration Report is produced as soon as possible after 31st March each year, including updated figures for any countries where the movement since the preceding June exceeds a threshold specified in the Staff Regulations.

The detailed reports are made available to Member State delegates in the Expert Working Group on Articles 64 & 65 of the Staff Regulations.

Statistics Explained articles

Dedicated Section   

The correction coefficients domain of Eurostat's database can be accessed under "Economy and finance" - "Prices" - "Correction coefficients" (prc_colc).

Figures are made available following transmission of the Annual Remuneration Report.

Results below the level of the analytical categories are generally not disseminated to the general public.

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The latest version of the "Methodological manual for the calculation of  Intra-EU correction coefficients" is available online (see Annex at the bottom of this page).

The latest version of the "EUROSTAT-OECD Methodological manual on purchasing power parities" is available online (see Annex at the bottom of this page).

The latest version of the "Eurostat Methodological manual on harmonised index of consumer prices" is available online (see Annex at the bottom of this page).

All countries in the European Comparison Programme produce detailed inventories of the data sources and methods applied in the provision of basic data. In addition, countries provide quality reports ("survey reports") to Eurostat following the finalisation of each consumer price survey.

Similarly, countries provide quality reports ("survey reports") to Eurostat following the finalisation of each estate agency rent survey.

These reports are intended for internal use among the participants, and serve primarily the preparation of forthcoming surveys.

All basic data provided by participating countries undergo a detailed bilateral and multilateral validation process, described in detail in the Methodological manual on purchasing power parities (see 10.6).

Calculations at aggregate level are done by Eurostat. They are cross-checked for consistency with the correction coefficients (duty stations) results established for active staff.

The inventories produced by the countries, as mentioned under 10.7, are used by Eurostat for in-depth assessment of the countries' sources and methods, in line with Regulation 1445/2007. The outcome of these assessments are released on Eurostat's website:

http://ec.europa.eu/eurostat/c/portal/layout?p_l_id=728743&p_v_l_s_g_id=0

Correction coefficients (countries) are used to adjust the pensions of retired officials and other servants of the European Union who are working outside Brussels and Luxembourg.

The correction coefficients (countries) may also be suitable for other uses: the information is made available publicly to allow other organisations to satisfy their needs as well.

Some users typically request data at a more detailed level than is currently authorised for publication either in the online database or in the detailed reports. Changing procedures to better accommodate such needs would require considerable modification to the existing methodology and organisation of the exercise, and is not feasible.

A "Rolling Review" on the European Comparison Programme was carried out in 2010 in the context of Eurostat’s Quality Assurance Framework. The Rolling Review consisted of a survey among users, a survey among partners (mainly the National Statistical Institutes) and a self-assessment by Eurostat.

A formal review of A64 Intra-EU correction coefficients for pensioners was carried out in 2010 and updated in 2021. This included informal contact with users, lessons drawn from partners (mainly the National Statistical Institutes) and a self-assessment by Eurostat. End-users and data partners are consulted annually regarding data quality.

Correction coefficients (countries) are calculated and published for all the EU Member States.

The precision of parities, and therefore the precision of correction coefficients, increases with the level of aggregation. This means that the parity at the level of total household consumption will be more reliable, or precise, than the parity for "food and non-alcoholic beverages" which is one of the sub-aggregates of final household consumption (12 main COICOP groups). Similarly, the parity for "food and non-alcoholic beverages" will be more reliable than the parity for "bread and cereals" which is one of the analytical categories within that COICOP group.

The input data into the parity calculation process comes from several sources, specifically, from special price surveys of consumer goods and services, and special surveys of household consumption expenditure. This makes it impossible to calculate any meaningful, numerical measure of error margins for parities.

Not applicable

In the consumer goods price surveys, measurement errors can potentially occur due to non-compliance with the strict definition of the products in the product sample, for instance with regard to package sizes or quality parameters. While the validation process aims at eliminating these errors by carefully comparing the price material provided by each country and evaluating its plausibility, some of these errors can be hard to identify, especially those related to quality.

While non-response from one particular statistical unit can usually be easily overcome by replacing that unit, and normally has a very limited impact at the level of the published categories anyway, a special problem does occur where no prices are available for a given item in Belgium or in the Member State concerned. In these cases, a price relative is imputed on the basis of the price relatives for other items. If a country does not report prices for any sample product in a given basic heading, the gaps are typically filled using the parity of either a "similar" basic heading, or of a hierarchical category.

Correction coefficients for June (1st July) are published in autumn of the same year.

Eurostat is required by the Staff Regulations to deliver its Annual Remuneration Report by the end of October.

Correction coefficients are specifically designed as spatial price level indicators, and the comparability of the results across countries can be assumed to be very good. 

Correction coefficients are designed to compare price levels for different geographical locations at the same point in time. Temporal consumer price indices on the other hand are designed to compare price levels for the same geographical location at different points in time. This difference has important implications for the way in which items are selected and defined, and other aspects of methodology. It is conceivable that two successive calculations of correction coefficients may use quite different samples and methodologies, if this is considered necessary to produce a spatial comparison of improved quality. Unfortunately, no indicator exists that simultaneously captures spatial and temporal aspects in an adequate manner. Clearly a degree of care is therefore required when interpreting the temporal development of correction coefficients.

Eurostat publishes a variety of different price level indicators, each designed to satisfy particular user needs. As methodologies and data sources vary, so the magnitude and direction of change identified by these indicators can differ. The following is a non-exhaustive list :

• Correction coefficients (duty stations) compare the bilateral price level of duty stations with Brussels.
• Correction coefficients (countries) compare the bilateral price level of Member States with Belgium.
• Purchasing power parities calculated using the multilateral EKS formula compare the price level of Member States relative to the EU average.
• Harmonised indices of consumer prices measure the temporal change in prices within each Member State. 

Not applicable

Correction coefficients (countries) make maximum use of data already compiled from the European Comparison Programme and the Harmonised Indices of Consumer Prices and other input data for the similar exercise to establish correction coefficients (duty stations). Minimal additional response burden is created.

The regular calculation and publication schedule is outlined in sections 8, 9, 10 and 14.

The revision policy is set out in the Methodological manual for the calculation of Intra-EU correction coefficients.

Correction coefficient methodology and data quality are under continuous review both within the Expert Working Group on Purchasing Power Parities (for basic data on consumer goods and services) and in the Expert Working Group on Articles 64 & 65 of the Staff Regulations, and in the context of collaboration with partner international organisations. 

Survey prices for consumer goods and services except housing rents and education, are obtained from the European Comparison Programme and these are updated until the next survey of the same type using the detailed subindices of the Harmonised Indices of Consumer Prices. Item samples are determined by Eurostat in collaboration with Member States and the OECD. The final selection should be comprised of comparable items and, to the largest extent possible, be equally representatives of the consumption expenditure patterns in participant countries. Subsequent data collection is conducted by national statistical institutes.

Capital city rent prices are obtained from specific surveys of real estate agencies coordinated by Eurostat and the International Service for Remunerations and Pensions of the Coordinated Organisations. Adjustment ratios to convert from capital city to national average price level are obtained from national statistical institutes.

Cost data for European Schools and price data for private schools is obtained by direct surveys. Price data for universities is obtained from Eurydice annual report.

Expenditure weights for aggregation purposes are obtained from periodic surveys conducted amongst retired international officials.

In order to reduce the response burden, there is a three year rolling cycle of surveys in the European Comparison Programme. This cycle covers the whole basket of goods and services, with two surveys organised each year.

Estate agency rent surveys are conducted annually.

Cost and price data for schools is compiled at three yearly intervals.

Household budget surveys are conducted at intervals of between 5-7 years.

Prices are compiled from appropriate retail outlets, mainly through physical visits. For some items, questionnaires, telephone calls, internet surveys and scanner data are used. Within the general framework laid down in the European Comparison Programme, national statistical institutes have a degree of freedom as to how to conduct the data collection.

Household expenditure surveys ("family budget surveys") are conducted using an online questionnaire developed in collaboration with partner international organisations. Where adequate population data is available, results from family budget surveys are calibrated ex post to fit the population distribution.

The validation of input data is an interactive process between Eurostat and the national statistical institutes.

The calculation of the overall parity involves three stages.

a) At the level of each individual item, price observations are averaged (simple arithmetic mean). These average prices are then used to calculate a price ratio relative to Belgium.

b) At the basic heading level, the price ratios for all items in that group are averaged (simple geometric mean).

c) Finally, the basic heading parities are aggregated (weighted arithmetic mean) using the basic heading expenditure weights.

Not applicable.

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