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Addressing cross-cutting issues for SPPI’s – 2008 Revision Matt Berger 23rd Voorburg Group, Aguascalientes, Mexico 2008 Why are we here? • Establishing internationally comparable methodologies for service sector GDP – “Constant dollar output of the service industries” • Emphasis on SPPI’s, classifications and turnover surveys – And bringing them together for service sector GDP Voorburg 2008 ONS - Cross Cutting Issues for SPPI's - 2008 Revision, 22-26 September 2008 2 Revision? Voorburg 2008 ONS - Cross Cutting Issues for SPPI's - 2008 Revision, 22-26 September 2008 3 Revision! • Need identified at 21st Voorburg Group, Wiesbaden 2006 • Presented at 22nd Voorburg group, Seoul 2007 – Discussion – Clarifications and suggested changes • Paper updated – Presentation will focus on key issues Voorburg 2008 ONS - Cross Cutting Issues for SPPI's - 2008 Revision, 22-26 September 2008 4 Product versus Industry • National accounts require product level SPPI’s • Industry SPPI’s exist because – – National statistics office historical infrastructure Multiple uses of SPPI’s • • Deflators, upstream indicators of inflation, contracts, international comparison Use of industry SPPI’s not appropriate – Except under strict assumptions regarding secondary production & quality Voorburg 2008 ONS - Cross Cutting Issues for SPPI's - 2008 Revision, 22-26 September 2008 5 Scope of SPPI’s • National accounts require SPPI’s to measure all outputs of service sector – – • Exports of services can occur even though service delivered within geographic boundaries – • Not just business-to-business Not just domestic sales Non-resident purchaser Difficulties might arise in separately identifying export transactions – But different destination mean different products Voorburg 2008 ONS - Cross Cutting Issues for SPPI's - 2008 Revision, 22-26 September 2008 6 Methods based on working time • Pricing method results in biased measures of GDP – • Arise frequently in practice because: – – • Only partial - bias still exists! Suitable only when consistent relationship between constant quality price of the service and labour inputs – • Model pricing too burdensome Pricing mechanisms use working time Steps to mitigate bias – • Except for supply of personnel type services Need to determine when this relationship changes Subcontracting! Voorburg 2008 ONS - Cross Cutting Issues for SPPI's - 2008 Revision, 22-26 September 2008 7 Changes to the production function • Changes to production function might change the service – IT changes typical example • SPPI measurement needs to identify – When change occurs – Whether products have changed Voorburg 2008 ONS - Cross Cutting Issues for SPPI's - 2008 Revision, 22-26 September 2008 8 Bundling • Feature of a pricing mechanism • Resolved via component approach – difficult in practice • Aggregate of components may cross “product classification” lines – “Logistic solution” includes freight plus storage • Common problem across all price indices – Work with Ottawa Group? Voorburg 2008 ONS - Cross Cutting Issues for SPPI's - 2008 Revision, 22-26 September 2008 9 Questions? • Thank you Voorburg 2008 ONS - Cross Cutting Issues for SPPI's - 2008 Revision, 22-26 September 2008 10