Post on 30-Dec-2015
BEA’s Measures of Capital
Robert KornfeldUNECE/Eurostat/OECD Task Force on Measuring Sustainable Development
September 23-24, 2009
bea.gov2
Outline
1. BEA’s core fixed asset accounts
2. Experimental or satellite measures of capital• Integrated BEA-BLS productivity accounts
• BEA’s R&D satellite account
• Human capital and home production
3. Conclusion
bea.gov3
BEA’s Fixed Asset Accounts
• Fixed assets are produced assets, which include Nonresidential fixed assets
Equipment and Software
Structures
Residential fixed assets (primarily housing)
Government fixed assets
Equipment and Software
Structures
• Valued at current cost, real cost, historical cost
bea.gov4
BEA’s Fixed Asset Accounts
Perpetual Inventory Method
Net stock: St = (1-d)*St-1 + (1-d/2)* It
where st = net stock at time ‘t’
d = depreciation rate
it = investment at time ‘t’
Depreciation Mt = It – (St – St-1)
Geometric rates are used for most asset types
bea.gov5
BEA’s Fixed Asset Accounts
CFC and Sustainability
CFC is the decline in the value of the stock of assets due to wear and tear, obsolescence, accidental damage, and aging.
CFC is deducted from the appropriate gross investment to obtain net investment in fixed assets. Net investment is an indicator of whether the corresponding capital stocks have been maintained intact.
bea.gov6
BEA’s Fixed Asset Accounts
Measuring Fixed Assets
Asset definition and asset boundary are clear Source data on investment is available and reliable Prices are market prices Depreciation used geometric rates based on research Perpetual inventory model can be implemented
bea.gov7
BEA-BLS Integrated Production Account
• US BLS estimates multifactor productivity (MFP) for private business
• MFP currently does not include • General government• Non-profit institutions serving households• Owner-occupied housing
• Harper, Moulton, Rosenthal, and Wasshausen, 2009• Detailed reconciliation of BEA and BLS statistics.• Integrated production account for private business sector• Expands core MFP estimates to include non-market government and
non-profit sectors, using BEA’s capital stock data for these sectors.
bea.gov8
BEA-BLS Integrated Production Account
Why Is Integration Needed?
Decentralized statistical system in the United States – BEA, BLS, Census, FRB
Calls for integration: System of National Accounts 1993 Jorgenson, Landefeld and Nordhaus, A New Architecture
for the U.S. National Accounts U.S. Dept. of Commerce – Measuring Innovation in the
21st Century Economy Advisory Committee Important potential applications of integrated GDP-production
accounts
bea.gov9
BEA-BLS Integrated Production Account
Non-market (government, nonprofit) production
Two major challenges: Directly measuring changes in real output
International efforts to measure volume of certain services, such as health and education, for non-market producers
Measurement of capital services requires a measure of net return Possible approaches - Market interest rates, “real” interest
rates, internal rates for other sectors.
bea.gov10
The Knowledge Economy:The Importance of Updating Economic Measurements
$0
$2
$4
$6
$8
$10
$12
$14
$16
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
[GDP, Trillions of dollars]
1985: Worked with IBM to develop more accurate, quality-adjusted, computer prices.
2003: Share of GDP using quality-adjusted prices rises to nearly 1/5 of GDP.
2001: Introduced quality-adjusted prices for LANs
1999: Recognized investment in software and Introduced new services measures that capture the effect of new technology.
1996: Introduced chain-type measures of real GDP that better reflect the prices of high-tech and introduced new semi-conductor prices.
2006: BEA published preliminary R&D accounts
2007: BEA published updated R&D accounts
2009: BEA published framework for measuring intangibles and innovation
bea.gov11
BEA’s R&D Satellite Account
Provides a means of exploring the impact of capitalizing R&D spending on GDP growth
Provides a framework through which various methodological and conceptual issues can be worked out
Part of broader BEA program to improve measures of intangibles in national accounts
Why R&D? Good data on R&D expenditures collected by the National Science
Foundation for over 50 years Numerous studies of rates of return Greater professional agreement on its capitalization 2008 SNA recommends treating R&D expenditures as investment
BEA plans to incorporate R&D as a capital asset into the core accounts by 2013
bea.gov12
R&D Satellite Account: Conceptual Challenges
Definition of the unit of R&D output
R&D output price index
Depreciation and obsolescence
Public goods qualities of R&D
bea.gov13
R&D Satellite Account
Problems with Traditional Output Price Index
• Most R&D is produced on own account and not sold on markets.
Even when sold, the traditional price index method breaks down because R&D products are unique.
(Note – Traditional price indexes are based on repeated sales of an identical product.)
Unit of output volume is also not defined. Must turn to indirect approaches.
bea.gov14
R&D Satellite Account
Options for Output Prices
• Input Prices
• Productivity Adjusted Prices
• Downstream product prices Applied in 2007 BEA R&D satellite account.
• Other options
bea.gov15
R&D Price Index Options - Sample
0
20
40
60
80
100
120
140
160
78 80 82 84 86 88 90 92 94 96 98 00 02 04
I n
d e
x
Downstream product price Input price
Productivity adjusted price
bea.gov16
R&D Satellite Account
Measures of Depreciation
Difficult to measure because depreciation is often related to obsolescence, which can vary immensely across intangible assets.
Depreciation rates for these intangibles are necessarily based on assumptions guided by limited evidence
bea.gov17
Human Capital
BEA initiative would provide estimates of the stock of human capital, the rate at which the stock depreciates, and the returns to human capital investments.
Some limitations, largely because of limitations in source data
Limited to individuals’ investments in their human capital -- and not on-the-job training.
BEA will measure market-based investments in education, not individuals’ investments in time.
bea.gov18
Summary
Expanding the capital asset boundary requires addressing numerous measurement challenges
Defining the asset and its score
Defining and measuring investment
Prices/valuation
Depreciation
Rates of return/capital services