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Satellites and beyond GDP

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1 Satellites and beyond GDP
17 March 2005 Satellites and beyond GDP Mark de Haan

2 Content Satellite accounting: why extending or modifying the NA framework? Welfare Measurement Economic performance and social progress, Stiglitz, Sen & Fitoussi report (2009) Indicators and accounts

3 1. Extensions & modifications
17 March 2005 1. Extensions & modifications Why modifying the system? Deepening of specific sectors or (functional) activities: tourism, transport, health Introduction of alternative classifications Introduction of alternative concepts: human capital, household production Supplementary datasets

4 Sector analysis 1: Tourism
17 March 2005 Sector analysis 1: Tourism Tourism related expenditure is not necessarily predefined by specific goods & services or industries For example public transportation ‘Visitor consumption’: Expenditure outside your ‘usual environment’ (when being on holiday or on a business trip)

5 Sector analysis 1: Tourism
17 March 2005 Sector analysis 1: Tourism Some numbers for the Netherlands (2011) Tourism sector as % of GDP = 2,8% Tourism jobs as % of total = 4,5% Domestic supply (mln €) Characteristic services Accommodation and food serving Transport Culture, sports & recreation Non-characteristic services 5 5

6 1. Extensions & modifications
17 March 2005 1. Extensions & modifications Why modifying the system? Deepening of specific sectors or (functional) activities: tourism, transport, health Introduction of alternative classifications Introduction of alternative concepts: human capital, household production Supplementary datasets

7 Alternative classifications
17 March 2005 Alternative classifications Generation of income account Standard National Accounts (SNA, ch7) Compensation of employees Taxes less subsidies on production Gross operating surplus / mixed income Σ Gross value added Growth Accounts (SNA, ch20) Labour services (by type of labour input) Capital services (by type of asset) Σ Gross value added

8 Alternative classifications
17 March 2005 Alternative classifications Generation of income account a

9 1. Extensions & modifications
17 March 2005 1. Extensions & modifications Why modifying the system? Deepening of specific sectors or (functional) activities: tourism, transport, health Introduction of alternative classifications Introduction of alternative concepts: human capital, household production Supplementary datasets

10 Alternative concepts in the NA Example: human capital
17 March 2005 Alternative concepts in the NA Example: human capital Education expenditure Current SNA: consumption Alternative convention: gross fixed capital formation Logical consequences of this conceptual change: Gross fixed capital formation Production Compensation of employees

11 1. Extensions & modifications
17 March 2005 1. Extensions & modifications Why modifying the system? Deepening of specific sectors or (functional) activities: tourism, transport, health Introduction of alternative classifications Introduction of alternative concepts: human capital, household production Supplementary datasets

12 Supplementary (non monetary) data sets: economic accounting (SNA)
17 March 2005 Supplementary (non monetary) data sets: economic accounting (SNA) Production in money (€) Product input output Value added

13 physical terms (kg, joules)
17 March 2005 Supplementary (non monetary) data sets: environmental accounting (SEEA) Production in physical terms (kg, joules) Product input output Resource Residual \

14 17 March 2005

15 Example physical flow accounts
17 March 2005 Example physical flow accounts Change in value added and net energy use,

16 1. Extensions & modifications
17 March 2005 1. Extensions & modifications Conclusions: Standard national accounts are not the truth and nothing but the truth! Alternative concepts, classifications, accounting conventions and supplementary datasets may help to enhance the analytical usefulness of the national Accounts in specific policy areas. 16 16

17 1. Extensions & modifications
17 March 2005 1. Extensions & modifications Satellite Accounts may address (ESA2010, Ch.22): Agriculture, Environment, Health, Household production, Labour, Productivity, R&D, Social protection, Tourism. A few references: ESA 2010, Ch.22 SNA 2008, Ch.29 System of Environmental-Economic Accounting 2012 (EC,OECD,UN,WB) 2008 Tourism Satellite Account (EC,OECD,UN)

18 National Income  welfare
17 March 2005 2. Measuring wellbeing National Income  welfare Why not…?

19 National Income and Welfare
17 March 2005 National Income and Welfare Market production Labour  Capital   Consumption

20 National Income and Welfare
17 March 2005 National Income and Welfare Market production  Consumption Labour  Capital   Income distribution Non-market household production Consumption of Services (own account) Time use accounts cover non-market production beyond SNA boundaries. Labour  Leisure

21 National Income and Welfare
17 March 2005 National Income and Welfare Market production  Consumption Labour  Capital   Income distribution  Health (risks) Nature inputs  Non-market household production Consumption of Services (own account) Labour  Leisure Nature Environmental amenities

22 National Income and Welfare
17 March 2005 National Income and Welfare Market production Labour  Capital   Consumption  Income distribution Knowledge   Being educated Nature inputs   Health Non-market household production Consumption of Services (own account) Labour  Leisure Environmental amenities Nature

23 17 March 2005 GDP versus Welfare 2008 SNA, Chapter 1, Section H. The SNA and measures of welfare: (actual) Consumption and welfare Unpaid services External events Externalities Non-economic impacts (1.84) Some of these impacts may be captured by the basic SNA structure by way of satellite accounting. However, this is not expected to lead to comprehensive welfare measures. 23

24 Stiglitz, Sen and Fitoussi (2009)
17 March 2005 Stiglitz, Sen and Fitoussi (2009) Measurement of economic performance and social progress Limitations GDP (as measure of progress) Undermined confidence in official statistics (financial crisis) GDP rise versus disposable income decline Gross versus Net balancing items 24

25 Stiglitz, Sen and Fitoussi (2009)
Recommendations in three different domains (briefly summarized): Better measures for economic performance (better use of national accounts statistics) Focus on households and disposable income, wealth and income distribution (and less on GDP) Beter measures for wellbeing or quality of life Living standard, Health, Education, Political choice, Social connections, environment, security Aggregate (composite) indicators Sustainability and the environment Wealth of natural resources Accounting in physical terms

26 What makes people happy?
17 March 2005 What makes people happy? From Richard Layard Family income down 33% 1 Unemployed Job insecure Separated rather than married .. Health down 1 point (on 5 point scale) .. 26

27 SNA and Well-being main conclusions
National Income is not the measure of well-being Measuring all aspects of wellbeing requires a set of indicators Satellite accounts may help to enhance the scope of national accounts in the direction of welfare measurement 27

28 3. Indicators and accounts
17 March 2005 3. Indicators and accounts “Steering by the right compass…”

29 Measures of well-being Coverage of the various dimensions
17 March 2005 Measures of well-being Coverage of the various dimensions 1 Composite Indicators Human Development Index, Measure of Economic Welfare, Index of Economic Wellbeing 2 Indicator sets Structural Indicators (Lisbon Agenda, EU2020) UN millennium goals Sustainability monitor

30 17 March 2005

31 How to deal with the multi-dimensionality of Wellbeing?
17 March 2005 How to deal with the multi-dimensionality of Wellbeing? + Composite indicators One figure Subjective weighting Indicator sets Adressing all dimensions Difficult to communicate

32 3. Indicators and accounts
17 March 2005 3. Indicators and accounts Advantage of embedding indicators in accounting frameworks: Consistency and comparability Clear points of reference: GDP, Consumption, investment etc., Opportunities of analysing underlying relationships: trade-offs (environment versus income/employment) (resource) productivity measurement modelling Policy relevance

33 Education  R&D = public R&D
17 March 2005 Example: Indicator overlap EU Structural Indicators (Lisbon Agenda) Innovation and research Education  R&D = public R&D R&D  ICT = R&D expenditure related to software development Education  ICT = education related ICT expenditure

34 Total knowledge expenditure
17 March 2005 Knowledge related final expenditure, Netherlands 1995 1999 2000 2001 %-shares in GDP* Gross fixed capital formation ICT capital 2.2 4.0 4.0 4.0 R&D Enterprises 1.1 1.2 1.1 1.1 Other intangible assets 0.1 0.1 0.1 0.0 Final consumption Total education 4.3 4.2 4.1 4.2 R&D Government 0.9 0.8 0.7 0.7 Total knowledge expenditure 8.7 10.2 10.0 10.0

35 3. Conclusions Indicators and accounts
Composite (welfare) indicators are usually based on subjective aggregation methods Indicator lists are not easily comprehensible Indicators embedded in accounting systems enhance their conceptual quality and analytical strength (due to comparability)

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