EU KLEMS GROWTH AND PRODUCTIVITY ACCOUNTS Version 1.0. PART I Methodology

Transcription

1 EU KLEMS GROWTH AND PRODUCTIVITY ACCOUNTS Version 1.0 PART I Mehodology March 2007 Prepared by Marcel Timmer, Ton van Moergasel, Edwin Suivenwold, Gerard Ypma (Groningen Growh and Developmen Cenre) and Mary O Mahony and Mari Kangasniemi (Naional Insiue of Economic and Social Research) On behalf of he EUKLEMS consorium (see nex page) This proec is funded by he European Commission, Research Direcorae General as par of he 6h Framework Programme, Prioriy 8, "Policy Suppor and Anicipaing Scienific and Technological Needs". 1

2 EU KLEMS consorium 01 Riksuniversiei Groningen 01 Bar van Ark 01 Marcel Timmer 01 Gerard Ypma 01 Edwin Suivenwold 01 Lourens Broersma 01 Ton van Moergasel 01 Rober Inklaar 01 Bar Los 01 Carolina Casaldi 02 Naional Insiue of Economic and Social Research 02 Mary O'Mahony 02 Caherine Robinson 02 Nicholas Oulon 02 Ana Rincon 02 Anna Soo 02 Mari Kangasniemi 02 Peer Loveridge 02 Michela Vecchi 04 Cenre d'éudes prospecives e d'informaions inernaionales 04 Laurence Nayman 04 Michel Fouquin 04 Ania Wolfl 05 Cenre for Economic and Business Research 05 Svend Hougaard Jensen 05 Anders Sorenson 05 Thomas V. Pedersen 05 Marin Junge 05 Esben Anon Schulz 05 Mickey Jan Pedersen 06 CPB Neherlands Bureau for Economic Policy Analysis and Saisics Neherlands 06 Henry van der Wiel 06 Ae Nieuwenhuis 06 Paul de Jongh 06 Ruger Hoeksra 06 Gerri Zilmans 06 Hans Kolfoor 06 Ron de Hei 07 Deusches Insiu für Wirschafsforschung e.v. Berlin 07 Bernd Goerzig 07 Marin Gornig 08 Federaal Planbureau 08 Chanal Kegels 08 Jeroen Fiers 08 Luc Avonds 08 Bernadee Biaour 08 Bernard Klaus Michel 08 Koen Hendrickx 09 Isiuo di Sudi e Analisi Economica and ISTAT 09 Carlo Milana 09 Anonella Baldassarini 09 Germana Boone 2

3 09 Suzanna Manegazza 09 Cecilia Jona-Lasinio 10 Insiuo Valenciano De Invesigaciones Economicas, S.A. 10 Mailde Mas 10 Javier Quesada 10 Ezequiel Uriel 10 Lorenzo Serrano 10 Fransisco Perez 11 Helsingin kauppakorkeakoulu (Helsinki School of Economics) and Saisics Finland 11 Mai Pohola 11 Pirkko Aulin-Ahmavaara 11 Ani Pasanen 12 Ausrian Insiue of Economic Research 12 Michael Peneder 12 Karl Aiginger 12 Marin Falk 12 Serguei Kaniovski 12 Kur Kraena 12 Marcus Scheiblecker 13 The Vienna Insiue for Inernaional Economic Sudies 13 Peer Havlik 13 Rober Sehrer 13 Monika Schwarzhappel 13 Hermine Vidovic 13 Renae Prasch 13 Sebasian Leiner 14 AMserdam Business and Economic Research, Free Universiy 14 Eric Barelsman 14 Hans Quene 15 The Conference Board Europe and Dale Jorgenson and associaes 15 Eileen Ring 15 Dale Jorgenson 15 Mun Ho 15 Jon Samuels 16 Universiy of Konsanz 16 Jorg Beuel 17 Universiy of Birmingham 17 Mary O'Mahony 18 Pellervo Economic Research Insiue 18 Jukka Jalava 19 Japan 19 Kioi Fukao 19 Tsuomu Miyagawa 19 Korea 19 Hak Kil Pyo 20 Saisics Lucembourg 20 John Haas 20 Charles-Henri DiMaria 20 Julien Ciccone 20 Saisics Sweden 20 Tomas Skyesvall 20 Hans-Olof Hagen 3

4 Conens 1. Inroducion Coverage Growh and Produciviy Accouns Oupu and Inermediae Inpu Accouns Mehodology Pracical implemenaion Ousanding issues Labour Accouns Mehodology Pracical implemenaion Ousanding issues Capial Accouns Mehodology Pracical implemenaion Ousanding issues Produciviy Accouns Mehodology Pracical implemenaion Ousanding issues Counry aggregaions Mehodology Pracical implemenaion Ousanding issues References Appendix ables

5 1. Inroducion This documen describes he procedures, mehodologies and general approaches used in consrucing he firs public version of he EU KLEMS daabase (version March 2007). This daabase is par of a research proec, financed by he European Commission, o analyse produciviy in he European Union a he indusry level. This work is mean o suppor empirical and heoreical research in he area of economic growh, sudying he relaionship beween skill formaion, echnological progress and innovaion on he one hand, and produciviy, on he oher. In addiion he daabase is mean o suppor he conduc of policies aimed a supporing a revival of produciviy and compeiiveness in he European Union, requiring comprehensive measuremen ools o monior and evaluae progress. The consrucion of he daabase should also suppor he sysemaic producion of high qualiy saisics on growh and produciviy using he mehodologies of naional accouns and inpu-oupu analysis. The EU KLEMS growh accouns include measures of economic growh, produciviy, employmen creaion, capial formaion and echnological change a he indusry level for European Union member saes from 1970 onwards. The inpu measures include various caegories of capial (K), labour (L), energy (E), maerial (M) and service inpus (S). A maor advanage of growh accouns is ha i is embedded in a clear analyical framework rooed in producion funcions and he heory of economic growh. I provides a concepual framework wihin which he ineracion beween variables can be analysed, which is of fundamenal imporance for policy evaluaion. The measures will be developed for individual European Union member saes, and are linked wih siser -KLEMS daabases in he U.S. and Japan. In a laer sage, more counries will be added. Below we will firs ouline he disinguishing feaures of he daabase. The documen hen proceeds as follows. Secion 2 describes he coverage of he daabase in erms of counries, indusries and variables. Secion 3 lays ou he general growh accouning mehodology which has been used o generae growh accouns and is daa requiremens. In he following secions (Secions 4-6), he oupu and inermediae inpu accouns, labour accouns and capial accouns are discussed in urn. Sources for specific variables are discussed on a counry-by-counry basis in an accompanying documen PART 2 EU KLEMS Sources. Secion 7 describes he consrucion of he produciviy accouns. In Secion 8 PPPs and regional aggregaion issues are discussed. Disinguishing feaures of he EU KLEMS daabase A key obecive of he EU KLEMS daabase is o move beneah he aggregae economy level and examine he produciviy performance of individual indusries and heir conribuion o aggregae growh. Previous sudies have shown ha here is enormous heerogeneiy in oupu and produciviy growh across indusries, so analyss should focus on he indusry-level deail o undersand he origins of he European growh process. The daabase has been consruced on he basis of daa delivered by he consorium parners wih cooperaion of naional saisical offices, and processed according o agreed procedures which have been discussed wihin he consorium over he pas 18 monhs. These procedures were developed o ensure harmonisaion of he basic daa, and o generae growh accouns 5

6 in a consisen and uniform way. Imporanly, his daabase is deeply rooed in saisics from he Naional Accouns and follows he ESA95 framework in many respecs. Harmonisaion of he basic daa has focused on a number of areas: Indusrial classificaions: alhough harmonisaion was relaively easy o realise for he recen period for which NACE1 has been in use (wih he excepion of he US and Japan), older saisics were ofen in NACE70 or counry specific classificaions. Addiional daa had o be found o provide links across diverse classificaion sysems. Aggregaion levels: he level of indusry deail in he naional accouns saisics varied widely across counries, variables and periods. The EU KLEMS consorium has generaed a sysem which allows he comparisons of saisics a various levels of aggregaion by using a common indusry hierarchy for all counries. Reference year for volume measures: counries differ in he reporing of volume measures, e.g. previous year prices vis-à-vis differen base years. All series have been pu on a 1995 reference year. Price conceps: he price concep for gross oupu (basic prices) and inermediae inpus (purchasers prices) have been harmonised across counries. Solving breaks: various series had o be linked in order o bridge differen vinages of he naional accouns. This has been done according o sandardised mehodologies as discussed in he nex secions Labour inpu: various conceps of labour inpu (employees, self-employed, hours worked) and harmonised measures of persons engaged and hours worked have been developed. Labour services inpu: labour service inpu has been measured in a sandardised way by disinguishing a variey of labour ypes in erms of gender, age and educaional aainmen. For hese series addiional maerial has been colleced, as hey are no par of he sysem of naional accouns. Asse classificaion: alhough he SNA provides a classificaion of capial asses, i was no always deailed enough o back ou informaion and communicaion equipmen from he invesmen series. Addiional informaion has been colleced o obain invesmen series for hese asses. In addiion, he level of asse deail has been pu on a comparable basis. Capial services inpu: capial service inpu has been measured in a sandard way, using harmonised depreciaion raes and common rules o deal wih a variey of pracical problems, such as weighing and renal raes. Imporanly, capial inpu is measured as capial services, raher han socks. Mulifacor produciviy measures: MFP has been generaed on boh a gross oupu and value added basis according o a sandard mehodology developed by Jorgenson, Gollop and Fraumeni (1987). Inermediae inpu measures: Series on inermediae inpus are broken down ino energy, maerials and services using a sandardised classificaion. 6

7 2. Coverage In his secion we describe he coverage of he EU KLEMS daabase in erms of counries, indusries and variables. In principle, he period covered is from 1970 o 2004, bu due o daa limiaions his differs across counries, indusries and variables as discussed below. Variables and link wih Naional Accouns Table 2.1 provides an overview of all he series included in he EU KLEMS daabase. The variables covered can be spli ino hree main groups: Basic variables, growh accouning variables and addiional variables. The basic series conain all he daa needed o consruc single produciviy measures such as oupu per hour worked. They include nominal, volume and price series of oupu and inermediae inpus, and volumes and prices of employmen. All hese series are par of he presen European Sysem of Naional Accouns (ESA 1995) and can be found in he Naional Accouns of all individual counries, a leas for he mos recen period. The main assumpions used o consruc hese series were needed o fill up gaps in indusry deail and o link series over ime, in paricular in hose cases where revisions were no aken back o 1970 by he naional saisical insiues (NSIs). The variables in he growh accouning series are of an analyical naure and canno be derived from published Naional Accouns daa wihou addiional assumpions. These include series of capial services, of labour services, and of oal facor produciviy which are he hear and main aim of he EU KLEMS proec. The consrucion of hese series are based on a heoreical model of producion and needs addiional assumpions which are spelled ou in he following secions. Finally, addiional series are given which have been used in generaing he growh accouns and are informaive by hemselves. They include various measures of he relaive imporance of IT- and non- IT capial, and of he various labour ypes wihin he EU KLEMS classificaion. The las column of Table 2.1 indicaes in which secion he consrucion of a paricular variable is discussed. Table 2.1 Variables in EU KLEMS daabase Basic variables Secion Values GO Gross oupu a curren basic prices (in millions of local currency) 4 II Inermediae inpus a curren purchasers' prices (in millions of local currency) 4 IIE Inermediae energy inpus a curren purchasers' prices (in millions of local currency) 4 IIM Inermediae maerial inpus a curren purchasers' prices (in millions of local currency) 4 IIS Inermediae service inpus a curren purchasers' prices (in millions of local currency) 4 VA Gross value added a curren basic prices (in millions of local currency) 4 COMP Compensaion of employees (in millions of local currency) 4 GOS Gross operaing surplus (in millions of local currency) 4 TXSP Taxes minus subsidies on producion (in millions of local currency) 4 EMP Number of persons engaged (housands) 5 EMPE Number of employees (housands) 5 H_EMP Toal hours worked by persons engaged (millions) 5 H_EMPE Toal hours worked by employees (millions) 5 Prices GO_P Gross oupu, price indices, 1995 = II_P Inermediae inpus, price indices, 1995 = VA_P Gross value added, price indices, 1995 =

8 Volumes GO_QI Gross oupu, volume indices, 1995 = II_QI Inermediae inpus, volume indices, 1995 = IIE_QI Inermediae energy inpus, volume indices, 1995 = IIM_QI Inermediae maerial inpus, volume indices, 1995 = IIS_QI Inermediae service inpus, volume indices, 1995 = VA_QI Gross value added, volume indices, 1995 = LP_I Gross value added per hour worked, volume indices, 1995=100 3 Growh accouning variables LAB Labour compensaion (in millions of local currency) 7 CAP Capial compensaion (in millions of local currency) 7 LAB_QI Labour services, volume indices, 1995 = CAP_QI Capial services, volume indices, 1995 = VA_Q Growh rae of value added volume (% per year) 7 VAConL Conribuion of labour services o value added growh (percenage poins) 7 VAConH Conribuion of hours worked o value added growh (percenage poins) 7 VAConLC Conribuion of labour composiion change o value added growh (percenage poins) 7 VAConKIT Conribuion of ICT capial services o oupu growh (percenage poins) 7 VAConKNIT Conribuion of non-ict capial services o oupu growh (percenage poins) 7 VAConTFP Conribuion of TFP o value added growh (percenage poins) 7 TFPva_I TFP (value added based) growh, 1995=100 7 GO_Q Growh rae of gross oupu volume (% per year) 7 GOConII Conribuion of inermediae inpus o oupu growh (percenage poins) 7 GOConIIM Conribuion of inermediae energy inpus o oupu growh (percenage poins) 7 GOConIIE Conribuion of inermediae maerial inpus o oupu growh (percenage poins) 7 GOConIIS Conribuion of inermediae services inpus o oupu growh (percenage poins) 7 GOConL Conribuion of labour services o oupu growh (percenage poins) 7 GOConK Conribuion of capial services o oupu growh (percenage poins) 7 GOConTFP Conribuion of TFP o oupu growh (percenage poins) 7 TFPgo_I TFP (gross oupu based) growh, 1995=100 7 Addiional variables CAPIT ICT capial compensaion (share in oal capial compensaion) 6 CAPNIT Non-ICT capial compensaion (share in oal capial compensaion) 6 CAPIT_QI ICT capial services, volume indices, 1995 = CAPNIT_QI Non-ICT capial services, volume indices, 1995 = CAPIT_QPH ICT capial services per hour worked, 1995 reference 6 CAPNIT_QPH Non-ICT capial services per hour worked, 1995 reference 6 LABHS High-skilled labour compensaion (share in oal labour compensaion) 5 LABMS Medium-skilled labour compensaion (share in oal labour compensaion) 5 LABLS Low-skilled labour compensaion (share in oal labour compensaion) 5 LAB_QPH Labour services per hour worked, 1995 reference 5 H_HS Hours worked by high-skilled persons engaged (share in oal hours) 5 H_MS Hours worked by medium-skilled persons engaged (share in oal hours) 5 H_LS Hours worked by low-skilled persons engaged (share in oal hours) 5 H_M Hours worked by male persons engaged (share in oal hours) 5 H_F Hours worked by female persons engaged (share in oal hours) 5 H_29 Hours worked by persons engaged aged (share in oal hours) 5 H_49 Hours worked by persons engaged aged (share in oal hours) 5 H_50+ Hours worked by persons engaged aged 50 and over (share in oal hours) 5 8

9 Counry coverage Table 2.2 provides a lis of counries covered in his preliminary daabase. I also indicaes he period for which daa is available. In general, daa for is available for he old EU-15 counries, and series from 1995 onwards are available for he new EU member saes (EU-10). Table 2.2 Counries covered Counrycode Counries Period AUT Ausria BEL Belgium CYP Cyprus CZE Czech Republic DEW Wes-Germany DNK Denmark ESP Spain EST Esonia FIN Finland FRA France GBR Unied Kingdom GER Germany GRC Greece HUN Hungary IRL Ireland ITA Ialy JAP Japan LVA Lavia LTU Lihuania LUX Luxembourg MLT Mala NLD Neherlands PRT Porugal POL Poland SVK Slovakia SVN Slovenia SWE Sweden USA NAICS Unied Saes (NAICS based) USA SIC Unied Saes (SIC based) Indusry classificaion and coverage A he lowes level of aggregaion, daa were colleced for 71 indusries, he so-called Euk indusries. The indusries are classified according o he European NACE revision 1 classificaion. This classificaion is very close he Inernaional Sandard Indusrial Classificaion (ISIC) revision 3. Table 2.3 provides a lising of he indusries, including higher aggregaes. This indusry division is more deailed han he 2-digi (A60) level which is ofen used in European saisics. There are various 9

10 reasons for his. For he recen period (1995 and afer), almos all EU counries have supply-and-use ables a he A60 level. Therefore we ook he 60 indusries of he A60 lis as our saring poin and looked wheher furher indusry deail was needed for research purposes. Indusries which are ineresing from an analyical poin of view are hose which eiher sand ou in erms of skill and R&D inensiy, or in erms of ICT invesmen inensiy or ICT share in oupu. On he basis of hese consideraions he following 8 indusries were separaely idenified: (1) pharmaceuicals, (2) insulaed wire, (3) elecronic valves, (4) elecommunicaion equipmen, (5) scienific insrumens, (6) manufacuring of ships, (7) manufacuring of aircraf and (8) legal/echnical/adverising services. We also looked a he upcoming revision o ISIC and NACE in 2007, wih a view o developing a daabase ha will be boh relevan and curren in he years o come. Three imporan revisions will be: he spliing of (1) elecriciy from oher uiliies, (2) publishing from publishing and prining and (3) media services from recreaional aciviies, ec.. This adds anoher 3 indusries. The level of deail in he EU KLEMS daabase varies across counries, indusries and variables due o daa limiaions. In order o ensure a minimal level of indusry deail for which comparisons can be made across all counries, so-called minimum liss of indusries have been used. All naional daases have been consruced in such a way ha hese minimums are me. The minimum lis is differen for paricular groups of variables and ime-periods. Three groups of variables can be disinguished: variables needed o do labour produciviy growh and uni labour cos analysis (for he period from 1995 onwards, and he period before 1995), and addiional variables needed o do growh accouning (gross oupu, inermediae inpu, labour composiion and capial). The indusries included in each of hese hree groups are indicaed in Table 2.3. They include respecively 62, 48 and 31 indusries. The indusry deail for each counry conforms a leas o he minimum lis of indusries, bu ofen more deail is available. This informaion is given in Table 2.4. I indicaes for each counry he number of EU KLEMS indusries for which daa is available. For analyical convenience, he EU KLEMS daabase also provides files wih an alernaive aggregaion scheme. I includes useful aggregaes such as marke economy, marke services and goods producion. This aggregaion scheme is given in Appendix Table 3. The files aggregaed according o his scheme are labeled wih _al. 10

11 Table 2.3 Indusries in EU KLEMS daabase and minimum ses 11 GA LP TOT TOTAL ECONOMY X X X AB AGRICULTURE, HUNTING, FORESTRY AND FISHING X X X A AGRICULTURE, HUNTING AND FORESTRY X X 1 Agriculure X X 2 Foresry X X B FISHING X X C MINING AND QUARRYING X X X 1012 MINING AND QUARRYING OF ENERGY PRODUCING MATERIALS X X 10 Mining of coal and lignie; exracion of pea 11 Exracion of crude peroleum and naural gas and services 12 Mining of uranium and horium ores 1314 MINING AND QUARRYING EXCEPT ENERGY PRODUCING MATERIALS X X 13 Mining of meal ores 14 Oher mining and quarrying D TOTAL MANUFACTURING X X X 1516 FOOD PRODUCTS, BEVERAGES AND TOBACCO X X X 15 Food producs and beverages X 16 Tobacco producs X 1719 TEXTILES, TEXTILE PRODUCTS, LEATHER AND FOOTWEAR X X X 1718 Texiles and exile producs X X 17 Texiles X 18 Wearing Apparel, Dressing And Dying Of Fur X 19 Leaher, leaher producs and foowear X X 20 WOOD AND PRODUCTS OF WOOD AND CORK X X X 2122 PULP, PAPER, PAPER PRODUCTS, PRINTING AND PUBLISHING X X X 21 Pulp, paper and paper producs X X 22 Prining, publishing and reproducion X X 221 Publishing X 22x Prining and reproducion X 2325 CHEMICAL, RUBBER, PLASTICS AND FUEL PRODUCTS X X X 23 Coke, refined peroleum producs and nuclear fuel X X X 24 Chemicals and chemical producs X X X 244 Pharmaceuicals X 24x Chemicals excluding pharmaceuicals X 25 Rubber and plasics producs X X X 26 OTHER NON-METALLIC MINERAL PRODUCTS X X X 2728 BASIC METALS AND FABRICATED METAL PRODUCTS X X X 27 Basic meals X X 28 Fabricaed meal producs X X 29 MACHINERY, NEC X X X 3033 ELECTRICAL AND OPTICAL EQUIPMENT X X X 30 Office, accouning and compuing machinery X X 3132 Elecrical engineering X X 31 Elecrical machinery and apparaus, nec X X 313 Insulaed wire X 31x Oher elecrical machinery and apparaus nec X 32 Radio, elevision and communicaion equipmen X X 321 Elecronic valves and ubes X 322 Telecommunicaion equipmen X 323 Radio and elevision receivers X 33 Medical, precision and opical insrumens X X 3313 Scienific insrumens X 3345 Oher insrumens X 3435 TRANSPORT EQUIPMENT X X X 34 Moor vehicles, railers and semi-railers X X LP 95-04

12 35 Oher ranspor equipmen X X 351 Building and repairing of ships and boas 353 Aircraf and spacecraf 35x Railroad equipmen and ranspor equipmen nec 3637 MANUFACTURING NEC; RECYCLING X X X 36 Manufacuring nec 37 Recycling E ELECTRICITY, GAS AND WATER SUPPLY X X X 40 ELECTRICITY AND GAS 40x Elecriciy supply 402 Gas supply 41 WATER SUPPLY F CONSTRUCTION X X X G WHOLESALE AND RETAIL TRADE X X X 50 Sale, mainenance and repair of moor vehicles and moorcycles; reail sale of X X X 51 Wholesale rade and commission rade, excep of moor vehicles and moorcycles X X X 52 Reail rade, excep of moor vehicles and moorcycles; repair of household goods X X X H HOTELS AND RESTAURANTS X X X I TRANSPORT AND STORAGE AND COMMUNICATION X X X 6063 TRANSPORT AND STORAGE X X X 60 Inland ranspor X X 61 Waer ranspor X X 62 Air ranspor X X 63 Supporing and auxiliary ranspor aciviies; aciviies of ravel agencies X X 64 POST AND TELECOMMUNICATIONS X X X JK FINANCE, INSURANCE, REAL ESTATE AND BUSINESS SERVICES X X X J FINANCIAL INTERMEDIATION X X X 65 Financial inermediaion, excep insurance and pension funding X 66 Insurance and pension funding, excep compulsory social securiy X 67 Aciviies relaed o financial inermediaion X K REAL ESTATE, RENTING AND BUSINESS ACTIVITIES X X X 70 Real esae aciviies X X X 7174 Rening of m&eq and oher business aciviies X X X 71 Rening of machinery and equipmen X X 72 Compuer and relaed aciviies X X 73 Research and developmen X X 74 Oher business aciviies X X 7414 Legal, echnical and adverising X 7458 Oher business aciviies, nec X LQ COMMUNITY SOCIAL AND PERSONAL SERVICES X X X L PUBLIC ADMIN AND DEFENCE; COMPULSORY SOCIAL SECURITY X X X M EDUCATION X X X N HEALTH AND SOCIAL WORK X X X O OTHER COMMUNITY, SOCIAL AND PERSONAL SERVICES X X X 90 Sewage and refuse disposal, saniaion and similar aciviies X 91 Aciviies of membership organizaions nec X 92 Recreaional, culural and sporing aciviies X 9212 Media aciviies 9237 Oher recreaional aciviies 93 Oher service aciviies X P PRIVATE HOUSEHOLDS WITH EMPLOYED PERSONS X X X Q EXTRA-TERRITORIAL ORGANIZATIONS AND BODIES Noes: GA: Growh accouning ( ) LP70-95: Labour Produciviy and Uni Labour Coss ( ) LP95-04: Labour Produciviy and Uni Labour Coss ( ) 12

13 Table 2.4 Number of EUK indusries for which variables are available Labour Produciviy Growh Accouning EMS shares Labour Composiion AUT BEL CYP n.a. 59 n.a. n.a. n.a. CZE n.a DEW 52 n.a DNK ESP EST n.a. 61 n.a n.a FIN FRA GBR GER GRC n.a n.a HUN n.a IRL n.a. n.a. n.a. ITA JAP LVA n.a. 60 n.a. n.a. n.a. LTU n.a. 60 n.a. n.a. n.a. LUX n.a. MLT n.a. 57 n.a n.a. NLD 48/ POL n.a PRT 48/50 65 n.a. n.a. n.a. SVK n.a. 64 n.a SVN n.a SWE USA NAICS n.a. n.a. USA SIC Noes: EST: only nominal values for IIE, IIM and IIS GER: 66 indusry deail available from 1991 onwards, before 1991 i has 52 indusries; daa for GO TFP and VA TFP for can be found in DEW file HUN: Labour produciviy daa sars in 1991 or 1992 (WP1 in 1991, WP2 in 1992) ITA: afer 1992 some more deail (more han 48) is available, bu only in 1995 are here 62 available. JPN: Naional Accouns daa (for WP1) sars in LTU: no daa for Q, and some problems for P, herefore i looks like i doesn' mee he minumum requiremens LVA: no daa for P and Q (herefore 2 shor of Min. req.) LUX&MLT: quie some indusries are zero in Luxembourg and Mala, which explains why i seems he daa do no conform o he minimum requiremens NLD: 48 indusries for he period , 58 for he period PRT: for indusries SWE: 48 indusries are available for he period, 62 for he pos-1993 period 13

14 3. Growh and Produciviy Accouns In his secion we summarize he mehodology used o develop our measures of indusry-level oal facor produciviy growh. We begin wih he indusry-level producion funcion and show how his allows us o quanify he sources of oupu growh. In general, we follow he growh accouning mehodology as developed by Dale Jorgenson and associaes as oulined in Jorgenson, Gollop and Fraumeni (1987) and more recenly in Jorgenson, Ho and Siroh (2005). We follow heir noaion as close as possible. I is based on producion possibiliy froniers where indusry gross oupu is a funcion of capial, labour, inermediae inpus and echnology, which is indexed by ime,. Each indusry, indexed by, can produce a se of producs indexed by i indicaed by he producion possibiliy se g. Each indusry has is own producion funcion and purchases a number of disinc inermediae inpus indexed by i, capial service inpus indexed by k, and labour inpus indexed by l. The producion funcions are assumed o be separable in hese inpus, so ha: Y = g ( Y ) f ( K, L, X, T ) (1) i = where Y is oupu, K is an index of capial service flow, L is an index of labour service flows and X is an index of inermediae inpus, which consiss of he inermediae inpus purchased from he oher domesic indusries and impored producs. Under he assumpions of consan reurns o scale and compeiive markes, he value of oupu is equal o he value of all inpus: P Y = P K + P L + P X (2) Y K L X where Y P denoes he price of oupu, he price of capial services and K P denoes he price of inermediae inpus, P denoes X L P denoes he price of labour services. All variables are also indexed by ime, bu he ime subscrip is suppressed in he remainder of his paper wherever possible for breviy. This expression is evaluaed from he producer s poin of view and hus excludes all axes from he value of oupu, bu includes producer subsidies. This is he basic price concep in he Sysem of Naional Accouns The inpus are valued a purchasers prices and reflec he marginal cos paid by he user. Therefore hey should include axes on commodiies paid by he user (non-deducible VAT included) and exclude he subsidies on commodiies. Margins on rade and ranspor should be included as well. The measuremen of prices and quaniy of oupus is furher discussed in secion 4. In secion 6, capial service prices and quaniies are discussed in more deail. I is imporan o noe a his sage ha he price of capial services is defined as a residual such ha equaion (2) holds. The measuremen of prices and quaniies of labour services is discussed in secion 5. 14

15 Under he sandard assumpion of profi maximizing behaviour, compeiive markes, such ha facors are paid heir marginal produc, and consan reurns o scale, we can define MFP growh ( follows ln ) as ln = lny v ln X v ln K v ln L (3) X K L Growh of MFP is derived as he real growh of oupu minus a weighed growh of inpus where x = x x denoes he change beween year -1 and, and 1 v wih a bar denoing period averages and v is he wo period average share of he inpu in he nominal value of oupu. The value share of each inpu is defined as follows: P X P L X v = ; = P Y X Y L K L K ; v = v Y Y (4) PY PY P K X L K The assumpion of consan reurns o scale implies v + v + v = 1 and allows he observed inpu shares o be used in he esimaion of MFP growh in equaion (3). This assumpion is common in he growh accouning lieraure (see e.g. Schreyer 2001). Alernaively, one can perform growh accouning wihou he imposiion of consan reurns o scale and use cos shares, raher han revenue shares o weigh inpu growh raes (Basu, Fernald, and Shapiro 2001). Rearranging (4) yields he sandard growh accouning decomposiion of oupu growh ino he Y conribuion of each inpu and MFP (denoed by A ): lny = v ln X + v ln K + v ln L + ln A (5) X K L Y where he conribuion of each inpu is defined as he produc of he inpu s growh rae and is woperiod average revenue share. This decomposiion is he basis of he growh accouning resuls in he EU KLEMS daabase, as explained in Secion 7. In order o decompose growh a higher levels of aggregaion (see discussion below) we also define a more resricive indusry value-added funcion, which gives he quaniy of value added as a funcion of only capial, labour and ime as: V g ( K, L, T ) = (6) where V is he quaniy of indusry value added. Value added consiss of capial and labour inpus, and he nominal value is: 15

16 P V = P K + P L (7) V K L where V P is he price of value added. Under he same assumpions as above, indusry value added growh can be decomposed ino he conribuion of capial, labour and MFP ( V A ). lnv = w ln K + w ln L + ln A (8) K L V where w is he wo period average share of he inpu in nominal value added. The value share of each inpu is defined as follows w L 1 1 = ( P V ) P L ; w = ( P V ) P K (9) V L K V K In order o define he quaniy of value added, we assume ha he producion funcion is separable in inermediae inpu and value added. To remain consisen wih he gross oupu funcion, one needs o define he quaniy of value added implicily from a Tornqvis expression for gross oupu: lny = (1 v ) ln X + v lnv (10) V V or rewriing V V ( lny (1 v ) ln X ) 1 lnv = (10 ) v V where v is he average share of value added in gross oupu. The corresponding price index of value added is also defined implicily o make he following value ideniy hold: P V V = P Y P X (11) Y X If value added quaniy and price is defined in his way, MFP measured for gross oupu (as in 5) and MFP as measured for value added (as in 8) are proporional o each oher wih he raio of gross oupu over value added as he facor of proporion (Bruno 1984) 1 V 1 Y ln A = ln A (12) v V 1 However, noe ha his is only valid as long as value added volume growh raes are derived as in equaion (10). This is no always he case, see secion 4. 16

17 4. Oupu and Inermediae Inpu Accouns 4.1 Mehodology In order o provide a coheren se of indusry-level produciviy esimaes which cover he aggregae economy, one needs a consisen se of iner-indusry ransacion accouns. This mehodology was inroduced by Jorgenson, Gollop and Fraumeni (1987). We define he quaniy of oupu in indusry as an aggregae of M disinc oupus (using he Tornqvis index as before) : m Y ln Y = v lny (13) i= 1 v wih a bar denoing period averages and v is he wo period average share of produc i in he nominal value of oupu. The value share of each produc is defined as follows: wih v Y i i Y i i i 1 = ( p Y ) p Y (14) Y p i = he basic price received by indusry for selling commodiy i. For he rae of volume change of he aggregae oupu of an indusry he commodiy weighs should be seen from he producer s poin view i.e. reflec marginal revenue producs. This means basic prices, which include he subsidies on producs received by he producer. The inermediae inpu quaniy index for indusry is defined analogously by Y i i where v X i 1 = ( p X ) p X wih i X i i X i ln X = v ln X (15) i i X i X p i = he price paid by indusry for using produc i. There has been some confusion in he lieraure on he price concep o be used for inermediae inpus. I is generally acknowledged ha he inermediae inpu weighs should be seen from he user s poin of view i.e. reflec he marginal cos paid by he user. Mos sudies mainain ha purchasers prices should be used. These prices include axes on commodiies paid by he user (nondeducible VAT included), exclude he subsidies on commodiies, and imporanly, also include margins on rade and ransporaion (see e.g. OECD 2001). However, wheher rade and ransporaion margins should be included is crucially depended on he se of producs which are included in he analysis. When rade and ransporaion are included as separae producs, margins on oher producs should be allocaed o hem. In effec, one makes a disincion beween he inermediae produc as delivered by he producing indusry, valued a purchasers prices minus margins, and he rade and ransporaion services, valued a he margins. 2 This is he approach aken in Jorgenson, Gollop and Fraumeni (1987) and Jorgenson, Ho and Siroh (2005) and is o be preferred. However, in pracice we 2 See Timmer (2005). 17

18 have no been able o collec he necessary daa for his breakdown (see below) and use purchasers prices o value inermediae inpus in all cases, excep for he U.S. SIC daa. Inermediae inpus are divided ino various groups, such as energy (E), maerials (M) and services (S). This breakdown of inermediae inpus can be used for exending he growh accouning exercises, bu also convey ineresing informaion abou changing paerns in inermediae consumpion (see e.g. Jorgenson, Ho and Siroh 2005, chaper 4). 4.2 Pracical implemenaion In his secion, we describe he basic approach in deriving he following EU KLEMS variables. Table 4.1 liss he variables of he oupu and inermediae inpu accouns. The volume series are given as an index wih 1995 as he base year (1995=100). However, his does no mean ha he series are valued a 1995 prices. The indices are derived from annual volume growh raes based on chained Laspeyres or Tornqvis volume series, depending on he underlying daa maerial (see below). Price indices are derived from he nominal and volume series. Table 4.1 Variables of he oupu and inermediae inpu accouns Nominals GO Gross oupu a curren basic prices (in millions of local currency) II Inermediae inpus a curren purchasers' prices (in millions of local currency) IIE Inermediae energy inpus a curren purchasers' prices (in millions of local currency) IIM Inermediae maerial inpus a curren purchasers' prices (in millions of local currency) IIS Inermediae service inpus a curren purchasers' prices (in millions of local currency) VA Gross value added a curren basic prices (in millions of local currency) COMP Compensaion of employees (in millions of local currency) GOS Gross operaing surplus (in millions of local currency) TXSP Taxes minus subsidies on producion (in millions of local currency) Prices GO_P Gross oupu, price indices, 1995 = 100 II_P Inermediae inpus, price indices, 1995 = 100 VA_P Gross value added, price indices, 1995 = 100 Volumes GO_QI Gross oupu, volume indices, 1995 = 100 II_QI Inermediae inpus, volume indices, 1995 = 100 IIE_QI Inermediae energy inpus, volume indices, 1995 = 100 IIM_QI Inermediae maerial inpus, volume indices, 1995 = 100 IIS_QI Inermediae service inpus, volume indices, 1995 = 100 VA_QI Gross value added, volume indices, 1995 =

19 Basic Approach A crucial elemen in KLEMS growh accouns is he consisency of inpus and oupus wihin and across indusries. Therefore, he main building block of a KLEMS accoun is a series of inpu-oupu ables in which iner-indusry flows are recorded in a consisen way. Unil recenly, he main boleneck in produciviy research for mos counries was he lack of long-run series of hese ables. Bu since he inroducion and applicaion of he European Sysem of Accouns 1995 (ESA), his siuaion is changing rapidly for many European counries. In he ESA 1995, a plea was made for using SUTs as he building blocks for he consrucion of he Naional Accouns. Supply and use ables (SUTs) 3 are a paricular ype of inpu-oupu able. They race he supply and use of all commodiies in he economy, as well as he paymens for primary facors labour and capial. The supply able indicaes for each indusry he composiion of oupu by produc. This is used o derive indusry gross oupu indices. The Use able indicaes for each indusry he produc composiion of is inermediae inpus and value added componens. This is used o derive he inermediae inpu and value added series in he naional accouns. Therefore, long-series of SUTs seem o be naural saring poin for KLEMS accouns for European counries. Since 1995, many counries have sared o implemen he SUT approach and as a resul, he availabiliy of SUTs which are compaible wih he Naional Accouns has increased. However, he speed of implemenaion differs across counries. In addiion, here is variaion in he imeframe under which counries carry back he revisions, if a all. Consequenly, here are no many counries wih official long ime-series of nominal and volume SUTs. The mos imporan reason for his lack of long-run series is he maor revision of he Naional Accouns which ook place in many European counries in This revision included among ohers he ransfer of FISIM o using indusries and a shif o annual chained Laspeyres volume indices. As a resul, old SUT series needed o be revised, bu his process has been slow and differs across counries. To solve his daa availabiliy, he approach aken in he EU KLEMS proec is a wo-sep procedure. Firs, we sar from he mos recen and revised series by indusry on gross oupu (GO), oal inermediae inpu (II) and value added (VA) from he NA accouns. These series are exended and broken down ino more indusry-deail if needed (see below on how his is done). In a second sep we use available Use ables o decompose oal inermediae inpus ino energy (IIE), maerials (IIM) and services (IIS). In his way we reain a maximum of informaion as also older vinage Use ables can be used o provide a breakdown of inermediae inpus (see below). Clearly, his procedure is a second-bes soluion and awais furher revisions of he SUTs by NSIs. Linking Naional Accouns series In some cases NA series need o be linked, for example when he recen revision of he NA has no been aken back o In ha case, we link he series hrough splicing, i.e. apply growh raes of old 3 We use he erm supply and use ables (SUTs) here raher han IOT (Inpu-Oupu ables). In he erminology of he ESA95, supply and use ables refer o produc by indusry ables and inpu-oupu ables refer o indusry by indusry or commodiy by commodiy ables. IOTs are derived from SUTs hrough imposing various producion echnology assumpions which migh no fi he producion heoreic approach of growh accouning. In he pas, IOTs were consruced wihou a SUT framework and provided he only available daa on inermediae inpu caegories. Bu wih he inroducion of he ESA 95, NSIs have rapidly adoped he SUT framework. 19

20 NA series o he level of new series in a paricular link year. Before doing so, we check wheher he old and new levels in he link year are reasonably close. If no, his procedure is no carried ou, or a higher levels of aggregaion. This is indicaed in he counry source noes. Filling procedure for Naional Accouns series In case of missing daa here are basically wo procedures for esimaing nominal value added, employmen and compensaion daa by indusry: (1) applying shares derived from addiional secondary sources o higher level naional accouns aggregaes or (2) applying higher-level growh raes o more deailed levels. The firs is mos useful when for a paricular sub-secor here is no daa available for any year from he naional accouns. In ha case, he share of he sub-secor in some higher level aggregae is derived from addiional secondary daa sources and applied o he aggregae in he basic source. When daa is available in he basic source for some years, secondary daa shares are used for missing years provided hey correspond closely o he basic source. If no, growh raes from secondary daa are applied o he original basic daa for missing years. To mainain naional accouns compaibiliy a normalisaion procedure is used so ha subsecors add o he corresponding higher-level indusry aggregaes provided in he naional accouns. If here is a summaion discrepancy, he sub-secors absorb he residual in proporion o is weigh in he paren indusry. This procedure ensures ha oupu and employmen measures are naional accouns compaible and, imporanly, have he same economy-wide coverage. 4 The source descripions in PART 2 provide a deailed accoun of he filling procedures used for each counry, year and variable. The weighs provided are someimes only for gross oupu bu in some case, separae weighs are available for various variables, e.g. gross oupu, inermediae inpus and labour compensaion; see source descripion for each counry. An imporan issue when using separae weighs for a se of variables is inernal consisency: e.g. weighs for gross oupu and inermediae inpus should be consisen wih he weighs for value added, which in urn should be consisen wih he weighs for compensaion, gross operaing surplus and ne axes. If hese weighs were no consisen, our defaul opion was o use gross oupu and labour compensaion weighs. Weighs always refer o nominal values. We use nominal weighs also for he volume series, implicily assuming idenical price deflaors for he sub-secors. Aggregaion For all aggregaion (over producs or indusries) we use he Tornqvis quaniy index, which is a discree ime approximaion o a Divisia index. This aggregaion approach uses annual moving weighs based on averages of adacen poins in ime. The advanages of he Tornqvis index are wofold. Firs, i belongs o he preferred class of superlaive indices (Diewer 1976). More precisely, i exacly replicaes a ranslog model which is highly flexible, ha is, a model where he aggregae is a linear and quadraic funcion of he componens and ime. This is in conras o he chained Laspeyres index which is currenly employed in many European Naional Accouns, which is prone o subsiuion bias. In pracice, however, when applied as an annual chain, he Laspeyres index will no 4 Ofen addiional daa is aken from surveys. Sampling coverage and definiions in survey daa can differ wihin and across counries. 20