un-ece/eurostat/oecd meeting on national accounts april 2008 geneva measuring capital services oecd...
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UN-ECE/Eurostat/OECD Meeting on National Accounts
April 2008 Geneva
Measuring Capital Services
OECD
Agenda item 2a
Invited paper 4
Contents
• Background
• Basic idea: what are capital services?
• Purpose of capital services measures
Background
• 2003: United Nations Statistical Commission (UNSC) calls for update of the 1993 System of National Accounts
• Canberra II Group dealt with issues concerning the measurement of non-financial assets
• This included also capital services measurement in the national accounts
• Result: capital services are now recognised in the revised SNA but implementation is up to countries
What are capital services? (1)
• Anyone who is familiar with the user cost approach towards owner-occupied housing already knows what capital services are
• But some more explanation may be helpful
• There are two aspects to capital:– It is a storage of wealth (wealth aspect)– It has a role in the production of goods and
services (production aspect)
What are capital services? (2)• Wealth aspect
– Captures the market value of capital goods valuation of the stock at market prices
– The appropriate entry for balance sheets
– Corresponds to the net capital stock in the SNA93
• Production aspect
– Captures the flow of productive services from capital into production
– The appropriate variable for productivity measurement
– Requires a different stock measure – the productive stock
What are capital services? (3)• Volume of capital services
– Assumed to be proportional to the productive stock
– Then, volume growth of productive stock = volume growth rate of capital services
• Productive stock
– Takes into account efficiency loss of older asset an age-efficiency profile is applied
• Wealth stock
– Takes into account total value loss of older asset an age-price profile is applied
What are capital services? (4)
• Price of capital services
=User costs per unit of productive stock
– Main elements of user costs:• Real rate of return (r)
• Rate of CFC (d)
• Real holding gains/losses (left out in simplified approach)
What are capital services? (5)
• Total value of capital services– Price of K-services * Productive stock – Simplest form: (r+d)p*K– This corresponds to the user cost approach
towards owner occupied housing (ignoring intermediate inputs)
Purpose of capital services measures (1)
• Normally, no link between value-added and capital, except for CFC as the measure that brings us from GOS to NOS
• Capital services measures establish the link between capital input and value-added:
• Total value of capital services can be equated with GOS (plus the capital part of mixed income)
Purpose of capital services measures (2)
• Consequence: the income side of the account can be de-composed into a price and into a volume component– Price component: wages and prices of capital
services (=user costs)– Volume component: numbers employed and volume
of capital services
• With volume measures for labour and capital, combined measures of volume inputs can be computed
• Volume output/volume input = MFP
Capital measures in SNA93
Time series of GFCF by type of asset all
expressed at same mid-year prices
Retirement profile
Net capital stock
Balance sheets
Net domestic product
Consumption of
fixed capital
Age-price or depreciation
profile
Integrated system of capital measures
Age-efficiency
profile
Time series of GFCF by type
of asset all expressed at
same mid-year prices
rate of return
Retirement profile
Age-price profile
Deprieciation profile
Productive capital
stock/capital services by
asset
Net capital stock
Consumption of fixed capital
Balance sheets
Total capital services
User costs of capital
Net domestic product
The distinction between net capital and capital services matters empirically:
example USA
Conclusions
• Capital services measures add significant analytical value to national accounts – price/volume split of income side and productivity measurement
• Capital services, net capital stock, CFC and GFCF should form a consistent and integrated set
• Implementation requires extra effort but much of the empirical requirements are also needed for good quality measures of CFC and net stocks
More details…
• Forthcoming chapter in revised SNA
• OECD Capital Manual– Draft version on OECD website– Final version available by June 2008
• Contact: [email protected]