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Markups and …scal transmission in a panel of OECD countries
Falko Juessen and Ludger Linnemann
A
A.1
Data
Annual panel VAR
In this appendix, we give details on data construction. The countries included in the panel
are all OECD countries for which all data were available for the period 1970 to 2008.
These countries are Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal,
Spain, Sweden, the United Kingdom, and the United States. Germany has been left out
to avoid problems with structural breaks due to uni…cation.
The data are taken from four sources: the European Union’s Directorate General for
Economics and Finance Annual Macroeconomic Database (AMECO), the Organization for
Economic Cooperation and Development (OECD), the University of Groningen’s Growth
and Development Database (GGDC), and the International Monetary Fund (IMF). All
data are retrieved from the respective publishing institutions’websites, with the exception
of the IMF data, which are from the International Financial Statistics CD-ROM.
The (observable) variables entering the panel VARs are:
yt : Real gdp per capita: Gross domestic product at 2000 market prices (AMECO),
divided by total population (AMECO).
gt : Real government spending per capita: Final consumption expenditure of general government at current prices (AMECO), divided by the price de‡ator of gdp
(AMECO), and divided by total population (AMECO).
ct : Real private consumption per capita: Private …nal consumption expenditure at
2000 prices (AMECO), divided by total population (AMECO).
bt : Government debt-to-output ratio: mostly general government consolidated gross
debt (percentage of gdp at market prices) (AMECO), exceptions see below. This
variable is included to control for the …scal stance instead of the tax rate series that
we use in the quarterly data, and for which we do not have su¢ ciently long data to
be used in the annual sample.
Rt : Real interest rate: Long term government bond yields (IMF, International Financial Statistics, except for Finland and Spain. For these countries, the IMF data are
missing and the long term interest rate from the OECD Main Economic Indicators
was used instead), less growth rate of price de‡ator of gdp (AMECO).
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For the construction of markups and utilization rates, we need data on real wages,
hours worked, and the capital stock (and output yt ):
wt : Real wage rate: Compensation of employees (AMECO), divided by the price
de‡ator of gdp (AMECO), divided by total annual hours worked (GGDC).
nt : Hours: Total annual hours worked (GGDC).
kt : Capital stock: Net capital stock at 2000 prices, total economy (AMECO).
For some countries for which AMECO data has not been available, the debt-to-output
ratio has been taken from the OECD Economic Outlook Database 85, http://stats.oecd.org/
Index.aspx (general government gross …nancial liabilities, as a percentage of gdp). These
countries are Canada, Norway, the Netherlands, and France. For Australia, the net
debt as a percentage of gdp has been taken from the country’s treasury website at
http://www.budget.gov.au/2008-09/content/fbo/html/appendix_b.htm.
In some cases, minor data adjustments have been made: 1) the capital stock series for
Australia and New Zealand lack entries for 2007 and 2008; the missing values were extrapolated by …tting and forecasting a quintic time trend to each series, 2) the Portuguese
nominal interest rate is missing for 1974 and 1975; it has been interpolated linearly, 3)
the Portuguese debt-to-output ratio is missing for 1973; the value for 1974 has been used
instead , 4) the gross debt level (gross sovereign issued debt), and consequently the debtto-output ratio, for New Zealand has been taken directly from the country’s treasury
website; the observations for 1970 and 1971 were missing and were set to the value of
1973.
All results have been checked for robustness in the following sense: we arrive at the same
conclusions as presented in the main text when we drop Australia, Luxembourg, Portugal,
and New Zealand from the sample (which are the countries for which data adjustments
have been made). The same holds if any single country out of these is excluded from the
analysis.
A.2
Data for the quarterly panel VAR
The countries included are all countries for which quarterly series on all variables are
available from 1995.I onwards. These countries are Belgium, Denmark, Germany, Finland, France, Italy, the Netherlands, Norway, Austria, Portugal, Sweden, the UK, the US,
Canada, and Australia. For the European countries, the main data source is Eurostat,
and some data are taken from the OECD’s Economic Outlook data base. For the nonEuropean countries, all data are from the OECD Economic Outlook data base. All data
were retrieved from the institution’s websites, and are (with the exception of interest rates)
seasonally adjusted by the publishing institution unless otherwise stated below. Since we
do not have a government debt variable at the quarterly frequency, we use a tax rate
measure t instead in order to capture the constraints from the government budget.
The (observable) variables entering the panel VARs are:
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gt : Real government consumption spending (Eurostat), divided by working age population (OECD).
yt : Real gdp: Gross domestic product at 2000 market prices (Eurostat), divided by
working age population (OECD).
ct : Real consumption spending of private households (Eurostat), divided by working
age population (OECD).
Rt : Real interest rate: Long term government bond yields (OECD), less four quarter
growth rate of price de‡ator of gdp (Eurostat).
ht : Hours worked, obtained by dividing real gdp through Eurostat’s series of real
hourly productivity; exceptions are the UK, the US, Canada, and Australia, where
hours were obtained by multiplying total employment with hours per worker (OECD).
For Belgium and Portugal, no hours series are available, such that employed persons
were used (we have checked that excluding Belgium and Portugal from the sample
does not materially a¤ect results).
wt : Real wage rate: Compensation of employees (Eurostat), divided by the price de‡ator of gdp (Eurostat), divided by hours worked ht . For Norway, the compensation
series has directly been obtained from Statistics Norway.
kt : Capital stock (OECD); this series is not available on a quarterly basis for Austria,
where linear interpolation of the corresponding annual OECD series has been used,
and for Norway, where linear interpolation of the annual capital stock series from
the European Commission’s AMECO database is used.
t:
Tax rate. For the European countries, the sum of taxes on production and imports plus taxes on income and wealth plus value added taxes (Eurostat), expressed
as percentage of gdp. For the non-European countries, government current receipts
as a percentage of gdp (OECD).
Further notes:
For Denmark and Austria, working age population is not available; here, total population (from Eurostat) has been used. The last two observations on German population are missing and have been extrapolated.
For Sweden, Eurostat’s series on gdp and labor compensation are only available
in non-seasonally adjusted form; these series have been seasonally adjusted by the
GRETL program’s X12-Arima procedure. The same is true for Eurostat’s tax revenue series for the European countries.
The labor share has been constructed as the ratio of nominal labor income to nominal gdp. Labor income is labor compensation plus the di¤erence between total
employment and dependent employment times the ratio of compensation to dependent employment (to correct for the labor income of the self-employed).
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Figure 6: Markup series, annual data
Australia
Austria
Belgium
Canada
Denmark
Finland
France
Ireland
Italy
Japan
1.8
1.7
1.6
Markup µ
1.5
1.4
1.3
1.2
1.1
1
1970
1975
1980
1985
1990
1995
2000
2010
Luxembourg
Netherlands
NewZealand
Norway
Portugal
Spain
Sweden
United Kingdom
United States
1.55
1.5
1.45
1.4
1.35
Markup µ
2005
1.3
1.25
1.2
1.15
1.1
1.05
1970
B
1975
1980
1985
1990
1995
2000
2005
2010
Markup series
Figure 6 displays the markup series t obtained using the approach outlined in the main
text, for the benchmark parameter set = 0:5 and = 1 and the annual data set. Note
that while the level of the average markup is imposed a priori, the ‡uctuations visible in
the …gures are not.
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