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Government and other nonmarket producers’ owned
assets
Carol S Carson
Anne Harrison
The story so far..
• AEG approves in principle including a
return to capital on assets used in nonmarket production
• Several countries express reservations,
some on principle, more on practical
grounds
• This is a search for a compromise
Carol’s consultations
• Further clarification to clear
misunderstandings
• Rate of return and justification for it
• Scope of assets to be included should
give heavy weight to practical
considerations
Conceptual and practical
issues
• Net operating surplus?
• Increases output;
• Increases final consumption by same
amount;
• Saving, financial account unaffected
Market and non-market
producers
• Why do this for non-market producers
and not for market?
• If capital services for non-market
producers is standard, why is it
supplementary for market producers?
• Capital services are included in
operating surplus (hence of which
suggestion)
Government and NPIs
• Does non-market mean non-profit?
• Market NPIs do include a profit and a
return to capital in their operating
surplus as indicated on the previous
slide
Yet more imputations?
• Difference between imputing a
transaction and imputing a value for a
transaction.
• Taking output as the sum of costs is an
imputation of value
• Includes consumption of fixed capital,
employers’ social insurance
contributions
No capital stock data
• How then to estimate consumption of
fixed capital?
• If this is by a rule of thumb, change the
thumb size slightly to convert this to
capital services
• See below for range of assets covered
Rate of return
• Use the rate of return estimated
endogenously for market producers?
• Not recommended because of volatility
• Rate on government bonds
• More stable not present rate but implicit
rate on all bonds outstanding to average
term structure and smooth effects of
changes
Rate of return cont
• Should countries with very high rates on
bonds have high capital services?
• Should use REAL rate of return in all
cases to apply to nominal capital stocks
values
• Even with high nominal rates, real rates
are likely to be more comparable across
countries
Example
• Asset worth 1000; rate of inflation 2%
per month
• Mid year value 1126
• Govt bonds 30%; inflation 27% (2%
compounded)
• Return to capital 3% of 1126, 34.1
• Compared to consumption of fixed
capital of, modestly, 112?
Range of assets
• Used by civil servants eg computers,
vehicles
• Benefits to whole economy; eg roads
• Benefits to community; eg city parks
• Land
Considerations
• Computers - yes
• Roads and infrastructure - ideally yes
but to be as conservative as possible
keep to cfc only
• City parks etc - data most likely to be
unavailable, adopt convention no return
and not even cfc
Land
• Land improvements will be treated as
computers
• Land under buildings included with
buildings treated as computers
• Open land - by convention do not
include return to capital
Consequences
• Computers - would increase GDP
• Roads - would increase GDP
• City parks - would decrease GDP
(conceptually)
• Open land - would decrease GDP
(conceptually)
• Last two would increase comparability by
compromising on perfection
Five questions -1
• Should rate of return on assets used by
non-market producers be taken to be
the real rate of return of interest on all
outstanding government bonds?
Five questions -2
• Should a rate of return for all assets
such as computers, vehicles and
buildings used by the employees of
non-market producers in their regular
work be included in the measurement of
the output of the non-market producer?
Five questions -3
• Should a rate of return for assets such
as roads and other infrastructure be
included in the value of output of
government?
Five questions -4
• Should the SNA acknowledge that
because data on such assets as city
parks and historical monuments are
often poor or non-existent, by
convention no estimates of either cfc or
a return to capital should be made for
these assets?
Five questions -5
• Similarly should the SNA recommend a return
to capital in respect of land under buildings
and structures be included in the
measurement of output of NMP where such
information is available separately from the
buildings and structures involved, but as a
convention neither estimates of return to
capital nor of cfc should be made in respect
of other land held by government?