05 capital services - unece€¦ · capital services capital services figure in two separate issues...

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United Nations Economic Commission for EuropeStatistical DivisionUnited Nations Economic Commission for EuropeStatistical Division

Capital Services

Baku, 24-26 September 2008

Presentation 5

* The presentation is making use of a presentation by Charles Aspden, OECD, at the UNECE/Eurostat/OECD Meeting on National Accounts, Geneva, April 2008

Presentation 5 Tiina Luige - UNECE Statistical Division Slide 2

Capital services in SNA93

• 1993 SNA does not explicitly recognisecapital services provided by non-financial assets

• 1993 SNA recognises consumption of fixed capital (CFC) but it is only part of the cost that the owner incurs

• OECD Manual on Measuring capital (2001) defines capital services

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Presentation 5 Tiina Luige - UNECE Statistical Division Slide 3

Capital services

� Capital services figure in two separate issues that were under review:� the general inclusion of the cost of capital

services in the SNA; � the replacement of depreciation with the cost

of capital services when summing inputs to measure non-market output.

Presentation 5 Tiina Luige - UNECE Statistical Division Slide 4

Capital services in 2008 SNA

� New chapter – no. 20, in Volume II� Draft ready, deadline for comments over� Capital services recognised but

implementation left up to countries

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Capital services – market production

• Recommendation for assets used in market production (issue 15)� Estimates to be included in supplementary

tables rather than core accounts� Confirmed that capital services and capital

stock measures should be complied in an integrated manner

� Basic concepts presented in SNA, details in the OECD Manual

Presentation 5 Tiina Luige - UNECE Statistical Division Slide 6

Capital services – explanation (1)

� non-financial assets used in production � contribute more to output than their initial cost� operating surplus is the return to capital used in

production� Perpetual Inventory Method (or PIM) to derive

estimates of the 3 capital-related measures: the asset value, a return on capital and consumption of fixed capital (CFC) � detailed recommendations in an updated OECD

Manual

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Presentation 5 Tiina Luige - UNECE Statistical Division Slide 7

Capital services – explanation (2)

There are two aspects to capital:� Wealth aspect (a storage of wealth)

• Captures the market value of capital goods• The appropriate entry for balance sheets• Corresponds to the net capital stock in the SNA93

� Production aspect (a role in the production of goods and services) • Captures the flow of productive services from capital into

production• The appropriate variable for productivity measurement• Requires a different stock measure – the productive stock

Presentation 5 Tiina Luige - UNECE Statistical Division Slide 8

Capital services – explanation (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

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Presentation 5 Tiina Luige - UNECE Statistical Division Slide 9

Capital services – explanation (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)

� Total value of capital services• Price of capital services (K) * Productive stock (p)• Simplest form: (r+d)p*K• This corresponds to the user cost approach towards

owner occupied housing (ignoring intermediate inputs)

Presentation 5 Tiina Luige - UNECE Statistical Division Slide 10

Capital measures in SNA93Time series of GFCF by

type of asset all expressed at same mid-

year prices

Retirement profile

Net capital stock

Balance sheets

Net domesticproduct

Consumptionof

fixed capital

Age-price or depreciation

profile

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Age-efficiency

profile

Time series of GFCF by type

of asset all expressed at

same mid-year prices

rate of return

Retirement profile

Age-priceprofile

Deprieciationprofile

Productive capital

stock/capital services by

asset

Net capital stock

Consumptionof fixedcapital

Balance sheets

Total capital services

User costsof capital

Net domesticproduct

Integrated system of capital measures – 2008 SNA

Presentation 5 Tiina Luige - UNECE Statistical Division Slide 12

The distinction between net capital and capital services matters empirically: example USA

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Purpose of capital services measures (1)� Normally, no link between value-added

and capital, except for CFC as the difference between Gross Operating Surplus & Net Operating Surplus

� 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)

Presentation 5 Tiina Luige - UNECE Statistical Division Slide 14

� The income side of the account can be de-composed into: • 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, measures of volume inputs can becomputed

� Volume output/volume input = MFP

Purpose of capital services measures (2)

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Presentation 5 Tiina Luige - UNECE Statistical Division Slide 15

Capital services - non-market production

Recommendation for assets used in non-market production (issue 16)�Maintain the present treatment�ISWGNA to undertake more research:

� Test thoroughly the impact on GDP� Take into account the differing degrees of

data availability around the world

Presentation 5 Tiina Luige - UNECE Statistical Division Slide 16

Impact on GDP

� Assets used in market production – no impact� Assets used in non-market production - if

adopted, then non-market output, and thus GDP, would be higher, it was not – no impact

� Implications – no new data collections required, but• Need to develop systems for estimating capital stock

and CFC in order to generate estimate of capital services in integrated way