world klems conference august 2010 harvard university klems methodology basic building blocks:...
TRANSCRIPT
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WORLD KLEMS CONFERENCEAugust 2010 Harvard University
KLEMS Methodology Basic Building Blocks: Measuring CapitalPaul Schreyer, OECD
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This talk
• The origins and basic ideas
• Capital services and the national accounts – the debate
• Looking ahead in capital measurement
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The origins
• Flow of services and user costs discussed by Léon Walras (1874) and Böhm-Bahwerk (1891)
• Model of capital as a factor of production introduced by Dale Jorgenson (1963) Capital Theory and Investment Behaviour
• Application to growth accounting by Jorgenson and Griliches (1967) The Explanation of Productivity Change
• Large body of literature followed
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The basic idea – 2 dimensions to capital
• Source of flows of services into production (the ‘K’ in the production function) Production aspect– Captured by recognizing that different types
of assets have different marginal productivities
– These are captured by asset-specific prices of capital services: user costs
– User cost weights are key in aggregating across different types of capital (akin to labour input)
• Component of wealth Wealth aspect
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The basic idea (2)• Traditionally, only wealth aspect
recognised in NA, via balance sheets
• Production aspect, if recognised at all, only in a partial and inaccurate way: depreciation as measure of capital input into production
• Yet, both aspects can be integrated into a system of accounts in a conceptually correct and consistent way
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InvestmentGross stock
Retirement
function
CFC
Net value addedAge -price
function
Productive stock
Age -efficiency
function
Return on capital
User costs
Capital services
Net capital stock
Generation of income account
Productionaccount
Balance sheet
Accumulation accounts
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The basic idea (3)• Consequence:• Symmetric treatment of labour and
capital in the production (and generation of income) accounts
• Both the value of labour income and the value of capital income can be broken down into a price and volume component vital for productivity computations
• SNA 59, SNA 68 and SNA 93 had asymmetric treatment of labour and capital
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Capital services and the national accounts – the debate
• First discussions in the context of the ‘Canberra I Group on Capital Measurement’ but notion of capital services was not adopted
• More discussions in Canberra II Group (2005-2008) and recognition of capital as an input in production measure put forward as issue in the Revision of SNA 93 SNA 2008
• 5 issues in the debate
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Issue #1: “Capital services measures mix up the real and
the financial side of the economy”
• Misunderstanding about the role of rates of return and holding gains and losses in user costs
• Absent market transactions, they form part of an estimate of an imputed transaction but not a recognition of capital gains as production
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Issue #2: “Government production is not for profit –
hence no net return on capital should be imputed for government assets ”
• Neglects the fact that government has financing costs or opportunity costs
• But SNA 2008 maintains that value of capital services for government asset = depreciation
• Ironically, net return is needed to identify non-market producers
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Issue #3: “There is no unique method to estimate user costs –
this will impair international comparability”
• No misunderstanding here but there are many instances in national accounting when different methods can be used and are used
• Real questions: – How much does it matter (N.Oulton’s paper)– Is not recognising user costs a better option?
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Issue #4: “Already too many imputations in the accounts – no
need to add another one”
• Fair point• Judgement about optimal level of
imputations varies between national accountants and analysts
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Issue #5: “Capital service measures imply a value
judgement by the statistician on functional income distribution”
• Capital services measures are indeed conceived with regard to a particular theoretical model (neoclassical theory)
• But issue is to be transparent about this. There is (and probably should be) no such thing as a theory-free national accounting
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Do capital services measures evolve differently from capital
stocks? Yes – example Australia
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Capital stock Capital services
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Looking ahead in capital measurement
• Linking industry and total economy accounts
• Capitalisation of intellectual property products beyond R&D: the debate on intangibles
• Capacity and capital utilisation • Natural and environmental assets• Human capital
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For more, and for references to the literature see...
Also available in French, Spanish and ...Korean
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Thank you!
OECD Productivity datawww.oecd.org/statistics/productivity/