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Productivity Measurement at Statistics Netherlands

Productivity Measurement at Statistics Netherlands. Dirk van den Bergen, Myriam van Rooijen-Horsten, Mark de Haan, Bert M. Balk OECD Workshop, Bern, 16-18 October 2006. Goals of the system. Consistent with NA. (As far as possible) free of assumptions.

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Productivity Measurement at Statistics Netherlands

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  1. Productivity Measurement at Statistics Netherlands Dirk van den Bergen, Myriam van Rooijen-Horsten, Mark de Haan, Bert M. Balk OECD Workshop, Bern, 16-18 October 2006

  2. Goals of the system • Consistent with NA. • (As far as possible) free of assumptions.

  3. Productivity measurement and growth accounting • IPROD ≡ Q(output) / Q(input) • Q(output) = IPROD × Q(input) • ln Q(output) = ln IPROD + ln Q(input) • %Δ (output) = residual + %Δ (input)

  4. Input / output model 1 • Capital K • Labour L Goods • Energy E Unit • Materials M Services • Services S • Input: Gross Output: • Cost Revenue

  5. Input / output model 2 • Capital K • Labour L Revenue • Unit • E,M,S Cost • Input: Output: • Cost Value added

  6. Output • Input • Gross output • Value added • Single factor • K or L or E • or M or S • K or L • Multi factor • Combination of K,L,E,M,S • - • Total factor • K,L,E,M,S • K and L Productivity measures

  7. Relations between TFP indices • IPROD-GO ≡ Q(gross output) / Q(KLEMS) • IPROD-VA ≡ Q(value added) / Q(KL) • If profit = 0 then ln(IPROD-VA) = • Domarfactor × ln(IPROD-GO) • Domarfactor ≡ GO / VA ≥ 1

  8. Choice of index formula • Selection should be based on properties (axioms, tests). • For the time being: Laspeyres quantity index for year t relative to year t-1, and chaining for comparisons over longer time spans. • Sensitivity analysis for alternatives pending.

  9. Aggregation • Aggregation means consolidation (= netting- out of intra-unit flows). • No simple relation between IPROD-GO of aggregate and subaggregates. • Simple relation between IPROD-VA of aggregate and subaggregates.

  10. Capital • 20 asset types, 60 industries, 18 institutional sectors. • Age measured from midpoint of year. • Year t has beginning t- and end t+; thus t = [t-,t+]; t also indicates midpoint. • Scrapping and sales of assets is supposed to happen at end of year; that is, at t+. • Investment (new and used) happens at midpoint of year and is immediately operational.

  11. User cost over year t (ex post) • For unit of asset of age j (at midyear) that is available at start of period t : • utj = rt+,t-Pt-j-0.5 + (Pt-j-0.5 – Pt+j+0.5) (j=1,…,J). • For unit of asset of age j (at midyear) that is invested at midyear : • vtj = rt+,tPtj + (Ptj – Pt+j+0.5) (j=0,…,J).

  12. User cost (2) • where r denotes nominal interest rate and P’s are prices (valuations). • Total user cost of this asset type is • Ut = ∑ utj Ktj + ∑ vtj Itj , • where K and I are quantities of assets (available at start of year and invested resp.).

  13. User cost (3) • Basic time-series depreciation model is • Pt+j+0.5 / Pt-j-0.5 = (Pt+0 / Pt-0)(1 – δj) • where δj is annual cross-section depreciation rate (from an age-price profile). • Start / end of period prices are approximated by midyear prices.

  14. User cost (4) • New asset price ratios Pt+0 / Pt-0 are estimated by PPIs (for ICT goods) and CPI (for all other; to ensure non-negativity of user cost). • Exogenous nominal interest rate r = α + %ΔCPI. Baseline: α = 0.04. • Taxes less subsidies are added at a higher level of aggregation.

  15. Capital stock and investment • No quantities Kjt but estimates of values (from PIM system). • All revaluations by PPIs. • No quantities Ijt but values (from investment survey). • Depreciation calculated by δj → CFC

  16. Labour • Two types (employees and self-employed) and 49 industries. • Unit of measurement: hour worked. • Assumption: self-employed have same annual income as employees (with one exception).

  17. Other inputs and outputs • GO, VA and EMS obtained from detailed supply and use tables (120 industries and 275 commodity groups). • Consolidation: problem with trade and transport margins due to the way of recording. • Breakdown of EMS into E, M, and S not self- evident for any industry. • Allocation of taxes-/-subsidies on production (according to NA) problematic.

  18. Results 1995-2004 and sensitivity analysis (1) • Baseline results: Tables 1 (GO) and 2 (VA). • Alternative treatment of trade and transport margins at consolidation (Table 3). • Different assumption on income of self- employed (Tables 4 and 5). • User cost: New asset price ratios Pt+0 / Pt-0 are estimated by CPI (for all goods) (Tables 6 and 7). • User cost: New asset price ratios Pt+0 / Pt-0 are estimated by PPIs (for all goods) (Tables 8 and 9).

  19. Results 1995-2004 and sensitivity analysis (2) • Exogenous nominal interest rate r = α + %ΔCPI. Alternatives: α = 0.03 and 0.05 (Tables 10-13). • Endogenous r with user cost new asset price ratios Pt+0 / Pt-0 estimated by PPIs (for all goods) and two assumptions on income of self-employed (Tables 14-19). • Comparison of ln(IPROD-VA) / ln(IPROD- GO) and Domarfactor ≡ GO / VA ≥ 1(Tables 20-23).

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