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Productivity Measurement at Statistics Netherlands

This paper discusses the goals, models, and results of the productivity measurement system used by Statistics Netherlands. It covers topics such as productivity measurement and growth accounting, input/output models, choice of index formula, aggregation, capital stock and investment, labor measurement, and other inputs and outputs. The paper also presents the results from 1995-2004 and sensitivity analysis for different scenarios.

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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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