1. EU KLEMS project on Productivity in the European Union Bart van Ark Presentation at NAWG Meeting Luxembourg, 15 May 2007 This project is funded by the European Commission, Research Directorate General as part of the 6th Framework Programme, Priority 8, "Policy Support and Anticipating Scientific and Technological Needs".

2. End of March 2006: restricted release of preliminary analytical database March-September 2006: Feedback phase from NSIs until September 2006, incl. bilateral meetings, workshops, etc. November 2006: very restricted release of draft version of first public release December-January 2006: additional feedback from NSIs and European Commission and suggestions for statistical module (letter Eurostat/EU KLEMS, 29 Nov 2006) 11 January: approval of first public release by EU KLEMS data coordination group Early March: green light from DG ECFIN and DG Research for release at Commission premises in Brussels Release events: 15 March 2007: public release in Brussels in presence of DG Eurostat and Commissioner ECFIN + website Eurostat for statistical module 19 March 2007: release event at European Central Bank 29 March 2007: release at Economic Policy Council, Brussels Milestones on EU KLEMS Database March 2006 – May 2007

3. What is in the March 2007 version of the EU KLEMS Database? March release is analytical module of EU KLEMS (uses feedback from NSIs but is only research database, not official statistics) Systematic data collection based on national accounts and complementary official sources (LFS and other surveys) Long time coverage 1970-2004, with greatest detail for post-1995 Harmonized methodologies on industry classification, capital and labour input, deflation and aggregations (e.g. market economy, market services, ICT producing vs. using) Decomposition of capital and labour input: Capital assets in 7 asset types Labour input in 18 categories (3 x skill; 3 x age and gender) Broad coverage of EU countries: Growth accounts coverage of old EU-10 (excl. GR, IR, LU, SE, PT) plus 5 new member states (incl. PL, SK, HU, CZ and SI) & Euro area Limited coverage of other 5 other old EU countries and 5 new member states (CY, MT, LT, LV and EE) Also comparisons with U.S. and Japan

4. Statistical vs. analytical modules of database Analytical module of the database Core of the EU KLEMS database Uses best practice techniques in area of growth accounting Focuses on international consistency Aim is full coverage (country * industry * variable) for revision period Consider alternative or pioneering assumptions (e.g., output and price measurement of ICT goods and non-market services, measurement of skill levels, construction of capital services, capitalization of intangible assets). Analytical database is a research data base and are not official statistics Statistical module of the database: Developed parallel to the analytical module Data consistent with those published by NSIs Methods according to rules and conventions on national accounts, supply and use tables, commodity flow methods, etc. (SNA 1993, ESA 1995) or at least supported by NSIs Statistical module meets statistical standards of NSI's and Eurostat and can eventually be incorporated in their present statistical practices and in New Cronos.

5. Leading themes in feedback from NSIs General support for development of KLEMS growth accounts in conjunction with national accounts Still large consistency problems with official national accounts Only output and labor input (employment and in some cases) hours can be compared … and even for those variables not always complete consistency Labor composition (age, gender, skill) and capital services not available in national accounts framework No information on comparative levels with national accounts framework Most NSIs (but with some exceptions) cannot promise implementation of KLEMS account in their statistical system In many cases statistical module cannot go beyond official national accounts: As published by NSI or transferred to Eurostat Will leave many statistical modules rather empty, and will not go beyond labour productivity Limited to no resources for most NSIs to work on productivity numbers

6. Many comments focused on differences national accounts versus EU KLEMS (I) General: Direct comparison with official national accounts only useful for statistical module purposes – analytical module is bound to differ Revisions and more recent (or later) data deliveries to Eurostat Aggregation to EU-aggregates (Eurostat) is done with PPPs Rounding differences Current value added and gross gutput: National accounts are complemented with other sources if not available for the entire period (e.g. for new member states) Adjustments for FISIM (e.g. UK) and implausible results (e.g. output- employment, GO-II-VA, negative output is excluded from growth account) Inconsistency between National Accounts (annually revised) and Supply and Use tables (not fully revised backwards) Constant value added and gross output: Analytical module is aggregated from detailed industry level with Tornquist aggregation which can lead to differences on A31 level and higher If value added turns negative, index cannot be calculated in analytical module

7. Many comments focused on differences national accounts versus EU KLEMS (II) Total employment and employees: EU KLEMS uses headcounts for all countries (with adjustments from jobs for AT, ES, UK) EU KLEMS uses employment numbers not adjusted for leave (e.g. maternity leave in Denmark EU KLEMS has in some cases adjusted NA data to correct implausible results (e.g. employees numbers above employment numbers) Hours worked In case no hours for self-employed were available, we have assumed self- employed to work the same hours as employees For some countries additional data on self-employed, leave and unregistered work has been added to adjust NA data to actual hours Adjustments for implausible average hours per person Generally complementary national accounts and growth accounts provide very useful check results

8. Next steps in EU KLEMS until end of 2007 New version of analytical module (December 2007): Revisions of data provided by NSIs Updates to 2005 Extend to include Greece, Portugal and Ireland and some of the remaining new member states Provide capital stocks in additional to capital services? Provide levels of capital services and TFP Plan for maintenance and prolongation of analytical module Central development will remain necessary for time being, probably by EU KLEMS consortium (or sub-group) Depending on financial support from European Commission and other parties Analytical module can only be used for research purposes until convergence with statistical module has further developed Possible extension of database (more country detail, intangibles incl. human capital, link with micro data) Development of statistical modules for individual countries and implementation (see below)

9. Options for statistical module According to Eurostat/EU KLEMS letter (29 November 2006): 1. Integrate analytical and statistical module 2. Use (modified) subset of data from analytical module in statistical module 3. No data from analytical module in statistical module Reactions from NSIs (summarized in EU KLEMS Statistical Progress Report, May 2007)

10. Options for statistical module

11. Strategy with regard to statistical module Follow-up contact between consortium members and NSI on details of implementation: Which series precisely to include: 1. Non-official but accepted data (grey) 2. Not accepted data (should be removed) 3. Official data that can stay in (black) 4. Own data of the statistical office that should replace EU KLEMS data (blue) Which time frame for publication? Who does what? (NSI, consortium member, joint effort) If only official output and value added as published in national accounts, is it really worth to have a statistical module? Check to include investment, capital stocks and labor composition data in public version The development of the statistical module is crucial to move EU KLEMS beyond a research database EU KLEMS consortium partners are willing to provide advice and help