National Accounts and Economic Statistics

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1 For Official Use STD/NAES(2005)8 Organisaion de Coopéraion e de Développemen Economiques Organisaion for Economic Co-operaion and Developmen 27-Sep-2005 English - Or. English STATISTICS DIRECTORATE STD/NAES(2005)8 For Official Use Naional Accouns and Economic Saisics MEASURING CAPITAL IN THE NETHERLANDS This documen has been prepared by Dirk van den Bergen, Mark de Haan, Ron de Heij and Myriam Horsen - Saisics Neherlands WORKING PARTY ON NATIONAL ACCOUNTS To be held on Ocober 2005 Tour Europe, Paris La Défense Beginning a 9:30 a.m. on he firs day English - Or. English For furher informaion please conac: Mark de Haan mhaa@cbs.nl JT Documen comple disponible sur OLIS dans son forma d'origine Complee documen available on OLIS in is original forma

2 MEASURING CAPITAL IN THE NETHERLANDS* Summary A Saisics Neherlands he developmen of produciviy saisics is addressed as a key field of ineres. The recen naional accouns revision a Saisics Neherlands was aken as an opporuniy o improve capial sock and depreciaion saisics. The Perpeual Invenory Mehod, as now applied a Saisics Neherlands, provides in a consisen way saisics on depreciaion, he ne capial sock, he producive capial sock and capial services. Furher, much aenion has been given o esimaing average service lives and discard paerns of differen asse ypes based on direc capial sock observaions in he manufacuring indusry. This paper presens he main feaures of his new sysem. * All auhors are employed in he Division of Macroeconomic Saisics and Disseminaion of Saisics Neherlands. Commens or quesions can be addressed o Mark de Haan, mhaa@cbs.nl, Tel: The views expressed in his paper are hose of he auhors and do no necessarily reflec he views of Saisics Neherlands. 1. Inroducion A Saisics Neherlands he developmen of produciviy saisics is addressed as a key field of ineres. The recenly finalised naional accouns revision resuled in several improvemens which will allow for he consrucion of naional accouns based produciviy saisics in he near fuure. For insance, he measuremen of labour volume in he labour accouns, as par of he Duch naional accouning sysem, was changed from full ime job equivalens o hours worked. Furher, he measuremen of capial sock and depreciaion was also improved considerably. The Perpeual Invenory Mehod (PIM), as now applied a Saisics Neherlands, generaes in a consisen way saisics on consumpion of fixed capial, ne capial socks, producive capial socks and capial services (i.e. he capial inpus ino producion). This paper presens he main feaures of his new sysem. In he pas, he purpose of measuring capial a Saisics Neherlands was mainly resriced o he calculaion of consumpion of fixed capial. Following recommendaions of he European Sysem of Accouns (ESA-1995, Eurosa, 1996) consumpion of fixed capial was esimaed on he basis of a linear age-price profile. In addiion, moraliy funcions were used o correc for he probabiliy of premaure asse discards. A disadvanage of his mehod was ha, alhough premaure discards were aken ino consideraion, no adjusmens were made for asses wih longer han average service lives. This asymmery resuled in overesimaing consumpion of fixed capial. In addiion o solving his asymmery problem, he revision of he Duch PIM also enailed: The developmen of one single framework for he simulaneous esimaion of ne (wealh) socks for fixed asses, producive capial socks and ulimaely he values and volume changes of capial services; A horough reconsrucion of invesmen ime series in curren and consan ( 1) prices by indusry, insiuional secor and asse ype; 2

3 An invesigaion of average service lives and decay paerns of various asse ypes in he manufacuring indusry based on direc observaions of capial socks and he so-called capial discard survey; The consisen recording of purchases and sales of second-hand capial goods. The revised PIM simulaneously provides he required saisics for compiling balance shees (wealh socks of fixed asses) and growh accouns (capial services in curren and consan price). The underlying conceps of his PIM are derived from he OECD (2001) handbook on Measuring Capial. The nex secion of his paper presens is concepual srucure. The subsequen secion discusses he use of direc capial sock observaions in combinaion wih he discard survey for esimaing average services lives and discard paerns. Secion four provides an overview of resuls while he final secion sums up plans for fuure work. 2. Concepual srucure of he Duch PIM 2.1 Measuring capial socks The OECD (2001) handbook on Measuring Capial provides he mehodological underpinnings of capial relaed macroeconomic saisics such as consumpion of fixed capial, ne capial socks and capial services. The handbook shows ha hese differen saisics are inerrelaed and should be consruced preferably in a consisen way, based on one concepual framework. Such a framework has been developed as par of he Duch naional accouns. In his framework he following ypes of capial socks are being disinguished: The framework sars off wih he compilaion of gross capial socks on he basis of esimaed discard funcions. The gross capial sock represens he replacemen value of all fixed asses used in producion. Replacemen value means ha hese asses are valued according o curren marke prices; The producive capial sock is subsequenly derived from he gross capial sock. The producive sock reflecs he level of capial services an asse is able o generae. The producive capaciy of asses is posulaed wih he help of so-called age-efficiency profiles. I is assumed ha he age-efficiencies of mos asses decline over heir service lives as a resul of wear and ear. The oal producive capial sock of a paricular asse ype is derived from aggregaing asses of various vinages according o heir ransformaion ino efficiency unis. Producive socks are paricularly useful for produciviy measuremen purposes; The ne capial sock represens he acual marke value of all fixed asses used in producion. Since mos capial goods are sparsely raded on second hand markes, marke values are approximaed on he basis of esimaing he ne presen values of curren and fuure capial services a capial good is expeced o generae during is remaining service life. These expeced flows of curren and fuure capial services are being deermined wih he help of, he above menioned, age-efficiency profiles. So, hese hree ypes of capial socks are inerrelaed and in he Duch PIM derived as follows Gross capial sock The replacemen value V in year of asses newly purchased in year j (vinage j) is deermined as follows. 3

4 V = I j Pi = V 1 P (1) i= j+ 1 Variable I j denoes invesmens in hisoric prices and P i denoes he corresponding price index of year i (where P i =1 when prices in year i do no change). So, all invesmens are being re-valued a curren prices. The gross capial sock GCS of he vinage j equals he replacemen value of all capial goods newly purchased a j ha are sill used in producion. Their gross capial sock is deermined by muliplying he replacemen value V by a corresponding survival rae S j. This survival rae denoes he fracion of asses of he age j ha is expeced o be sill ino service. GCS = V S j = S j I j Pi (2) i= j+ 1 The oal gross capial sock GCS is deermined by aggregaing over he various vinages j (asses of a paricular asse ype purchased a j. GCS GCS (3) = j= Producive capial sock The producive capaciy of capial goods is deermined by heir age-efficiency AE j. An ageefficiency funcion indicaes he developmen of he producive capaciy of asses over heir service life. For mos asse ypes i is assumed ha heir age-efficiency declines over ime. The age-efficiency parameer AE j represens he average age-efficiency of all asses of he age j ha are sill used in producion. The age-efficiency may vary beween 1 (when new) and 0 (a he end of an asse s service life). The age-efficiency parameer AE j is a weighed average of individual ageefficiency profiles of all asses of he age j ha are par of he gross capial sock a ime. This average mus be aken since asses of a paricular vinage will have diverging survival probabiliies. The parameer AE j indicaes he average age-efficiency level of a paricular capial sock of he vinage j compared o an idenical brand new capial sock purchased a ime. The concomian producive capial sock (PCS ) is calculaed as follows. PCS = AE j GCS j (4) j,, The average age-efficiency profile is deermined by describing he producive capial sock direcly as a funcion of he replacemen value (V ) of all invesmens in year j. For his purpose he oal ageefficiency profile TAE j is inroduced. The oal age-efficiency profile enails he average of ageefficiency profiles of individual capial goods of he vinage weighed by heir survival probabiliies. PCS = TAE jv j (5) j,, These individual age-efficiency profiles A M, j are assumed o be deermined only by he age j of he corresponding asse and is ulimae service life M. The variable L M in he following equaion denoes he probabiliy of an asse o end is service life afer M years. 4

5 L M d = S M (6) 1 dm The oal age-efficiency hen be deermined as follows. 0 TAE j = AM, j LM dm (7) I is assumed ha he age-efficiency levels of discarded asses equal o zero. The oal producive capial sock is ulimaely being deermined by aggregaing he producive capial socks, as esimaed above, for each of he differen vinages j. 2.3 Ne capial sock The ne (wealh) capial sock NCS, represening all asses of he vinage is deermined by calculaing he ne presen value of expeced capial services (or renals) generaed by his group of asses. NCS R j+ τ dτ = τ 0 (1+ r) (8) The variable R j+τ denoes he expeced capial services in year +τ (a curren prices) derived from presenly j old asses. Variable r represens he real discoun rae. Developmens in he volume levels of capial services are deermined by he oal age-efficiency profiles. This implies ha he renals in prices of year derived from all asses of he vinage j can be described as a consan C imes he oal age-efficiency profile TAE 1 : R 1 = C TAE (9) 1 The ne capial sock of all asses of he vinage j can hen be deermined as follows. NCS = C TAE j+ τ dτ τ 0 ( 1+ r) (10) The so-called age-price profile AP j represens he ne value of vinage j socks a ime as percenages of heir replacemen values. The age-price profile can be deermined independenly from he consan C. AP NCS j = = j NCS TAE j+ τ dτ τ 0 (1+ r) TAEτ dτ τ 0 (1+ r) (11) 1 For asses wih relaively small service lives, using a discree version of his equaion may in cerain cases lead o measuremen inaccuracies. Therefore he coninuous version is used insead for ne capial sock calculaions. 5

6 The so-called asse marke equilibrium condiion implies ha he ne presen value of boh pas and expeced capial services, as deermined by he oal age-efficiency profiles, derived from all asse of he age j equals heir replacemen value V. This condiion is expressed by he following equaion. V = C TAEτ dτ τ 0 ( 1+ r) (12) The corresponding ne capial sock a any poin in ime can hen be deermined by subsiuing equaions (12) and (11) ino equaion (10). NCS TAEτ dτ = C AP j τ 0 (1+ r) = V AP j (13) As a resul, he ne capial sock of asses of he vinage j is deermined by he replacemen value V imes is corresponding age-price profile. The oal ne capial sock is simply derived by adding up he corresponding wealh socks of all vinages. 2.4 Balance shees The former subsecions illusraed how he gross, producive and ne capial socks are being derived in sequenial order from invesmen ime series in curren and consan prices. Balance shees are consruced o keep record in a sysemaic way of all changes in asses in he curren year. The changes beween opening and closing socks enail he following enries: Asse price changes; Gross fixed capial formaion; Consumpion of fixed capial; Oher changes in he volume of asses such as sales and purchases of second-hand asses, reclassificaions and bankrupcies. Alhough sales and purchases are par of gross fixed capial formaion, for pracical reasons we have regisered hem as oher changes in asses in he PIM framework. Consumpion of fixed capial D is, according o he SNA-1993 (Commission of he European Communiies e al., 1993), defined as he negaive change in he value of fixed asses used for producion as a resul of physical deerioraion, normal obsolescence or normal accidenal damage. Consumpion of fixed capial is measured wih reference o he average prices in he curren year. This implies ha holding gains and losses are no accouned for in erms of depreciaion bu as asse price changes. Caasrophic losses are equally excluded from depreciaion bu accouned for in erms of oher changes in asses. For asses newly purchased in year consumpion of fixed capial is in he Duch PIM deermined as he annual change in he value of asses, measured in curren prices, before he recording of fixed capial formaion and he oher volume changes in asses. Anoher way o esimae he consumpion of fixed capial of asses belonging o vinage j is o muliply heir replacemen value wih he corresponding change in he age price profile. ( ) D = P NCS 1 NCS = V AP j 1 AP j (14) 6

7 The oher changes in asses include major sales of asses such as buildings, dwellings and ransporaion equipmen (specifically relaed o he erminaion of auomobile lease conracs). Two problems emerge when recording he sales and purchases of second-hand asses. In mos cases he age of capial goods ha change ownership is unknown. This informaion is obviously required and herefore assumpions abou he average ownership of sold asses mus be made; Due o exising differences in services lives, age-efficiency profiles and price developmens beween differen indusries, he recording of changes in ownership may lead o (usually small) discrepancies beween gross, producive and ne capial socks. Since hese discrepancies are usually raher small hey are simply being ignored. 2.5 The consrucion of invesmen ime series A subsanial amoun of work in his projec concerned he recovery of original source daa on invesmens. The firs year covered in he invesmen ime series in curren and consan ( 1) prices is The ime series were consruced a he level of 57 indusry branches, 20 asse ypes and 18 insiuional (sub)secors. For he saring year 1952 a gross capial sock was derived from an invenory of capial sock ha was sill in operaion afer he Second World War (Korn and Van der Weide, 1960). Addiional assumpions were made abou is age srucure. Special aenion was paid o he price indexes applied for (pre-packaged) compuer sofware and compue hardware. The corresponding producer price indexes colleced by Saisics Neherlands appeared o be unsaisfacory for wo main reasons. Firsly, impors are currenly no very well covered. This is a serious omission since he larger par of pre-packaged sofware and compuer hardware purchases in he Neherlands originae from impors. Secondly, no adequae adjusmens are being made for qualiy changes. As a resul, price saisics from he US Bureau of Economic Analysis and he US Bureau of Labour Saisics are used alernaively. The exen o which US dollar-euro exchange rae changes influence compuer and sofware prices in Europe seems uncerain. Therefore, no correcions are being made for US dollar-euro exchange rae changes. 3. Survival funcions and oher parameers For he manufacuring indusry, Saisics Neherlands has, in addiion o he invesmen survey, wo supplemenary daa sources available o esimae capial socks: direcly observed capial sock benchmarks and discard surveys. Boh sources are based on similar classificaions of asses and indusries. The combined use of hese sources allows for he esimaion of average service lives and discard paerns of various asse ypes in he manufacuring indusry. Such a research was earlier carried ou by Meinen e al. (1998). The resuls presened here are derived from more deailed and refined esimaions compared o heir work. Unil 2003 Saisics Neherlands colleced benchmarks of capial socks by direc observaions (on-sie visis by enumeraors). Unforunaely, hese visis were recenly ended as a resul of budge consrains. The Capial Sock Survey was colleced for all enerprises wihin he manufacuring indusry (ISIC 15-36) wih 100 or more employees. I was performed on a roaional basis in such a way ha each division of he manufacuring indusry (wo-digi ISIC level) was surveyed every five years. 2 See secion 3 of Van den Bergen a al. (2005) (in Duch) for a deailed descripion of used sources. 7

8 A leas wo benchmark years are available for each division (wo-digi ISIC level) of he manufacuring indusry. The Capial Sock Survey recorded all angible fixed asses ha were used by enerprises in heir producion processes, wheher he asses were owned, rened or obained by leasing conracs. The survey conained informaion on he following ypes of angible fixed asses: indusrial buildings, civil engineering works, exernal ranspor equipmen, machinery and insallaions, compuers and oher angible fixed asses (e.g. furniure, freigh conainers and silos). The second daa source available for asse service life calculaions is he Survey on Discards ha was inroduced a Saisics Neherlands in 1991 (Smees and Van den Hove, 1994). Discards in a paricular year comprise all fixed asses which are no longer used in he producion process. These asses have eiher been scrapped or sold on he second-hand marke. The Survey on Discards is colleced annually among all enerprises wihin he manufacuring indusry (ISIC 15-36) wih 100 or more employees. The oal number of enerprises ha acually respond is usually lower han wih he Capial Sock Survey because he Discard Survey is a mail quesionnaire while he Capial Sock Survey involved on-sie visis by enumeraors. 3.1 Esimaing discard funcions The Capial Sock Survey was only carried ou for enerprises wih a leas 100 employees. No observaions were available for smaller enerprises. This implies ha grossing up hese survey resuls is no really possible. However, he survey proves is usefulness in he esimaion of average service lives and discards paerns for various asse ypes in he manufacuring indusry. For his purpose, capial sock daa from he Capial Sock Survey in year 1 (a 31 December) were linked wih daa from he Discard Survey in year a he enerprise level. This resuled in a daabase conaining capial sock and discard daa for all enerprises responding o boh surveys. Daa from 1993 onwards were used in order o ensure wo fairly recen capial sock benchmarks for every indusry and o avoid difficulies wih he sandard indusrial classificaion conversion of In he Survey on Discards a disincion is made beween scrap and sales on he second-hand marke. Fixed asses were considered o be discarded when wihdrawn from he producion process of a paricular indusry (a approximaely 2-digi ISIC level) (meso poin of view). For he asse ypes oher machinery and oher equipmen (including inernal means of ranspor) and oher angible fixed asses i was assumed ha all sales on he second-hand marke occur beween enerprises wihin he same indusry (a approximaely 2-digi ISIC level). Therefore, only discards characerized as scrap were considered a discard in he esimaion of average service lives. For all oher ypes of capial goods i was assumed ha all sales on he second-hand marke occur beween enerprises belonging o differen indusries (domesic or foreign) or beween enerprises and households. Therefore, for hese remaining caegories of asses, scrap as well as sales on he second-hand marke were considered o be discards in he analyses. 3.2 The applied model A model was consruced ha, for each indusry (a approximaely a 2-digi ISIC level) and asse ype, connecs daa on discards wih daa on angible gross capial socks. This model is used o approximae for each vinage j a survival rae s j. This rae is deermined by he gross sock of asses newly purchased in he year j ha are sill being used a he beginning of a reference year, minus he discard values of ha vinage during he reference year, divided by he angible sock of ha vinage in use a he beginning of ha reference year. The survival rae denoes he probabiliy a capial good of a cerain vinage o survive unil i reaches age x given he fac i has reached age x 1, where x= j. 8

9 GCS 1, ( ) T j s j x (15) GCS 1 where GCS, = gross capial sock of vinage j in use a 31 December of year ; j T j, = value of reiremens of vinage j during year ; s j (x) = survival rae denoing he probabiliy ha a cerain fracion of a populaion of capial goods of a cerain vinage j survives unil i reaches age x given he fac i has reached age GCS 1, x 1: ( ) = ( 1) T j s j x P X j x X j x. GCS 1 I is assumed ha he survival rae a a cerain age j is equal for all vinages. s j ( x) = s( x) (16) From he survival raes, he survival funcion S(x) can hen be calculaed as follows. x ( x) = s( i) = s( x) S ( x 1) i= 1 S wih S(0)=1 (17) where, S ( x) = The survival funcion, or he probabiliy ha a cerain fracion of a populaion of capial goods reaches he age of x year, ha is, he probabiliy a fracion of capial goods is no discarded a an age younger han x year. I is assumed ha he survival funcion can be described by a Weibull disribuion as presened in he following equaion. α ( ) ( λx S x = ) x 0 e (18) In his funcion x denoes he age of he capial good, α he shape parameer and λ he size parameer. Given he Weibull disribuion parameers, he expeced service life E(x) of an x year old asse can be deermined as follows. 1 E ( x) = Γ( 1+ 1/ α ) (19) λ Here Γ denoes he Gamma-funcion and E(x) he life expecancy. 9

10 3.3 Esimaed service lives The esimaion of opimal parameer values of he assumed Weibull disribuion was performed a he indusry branch (a approximaely 2-digi ISIC level) by asse ype level. An adjusmen for ouliers, o avoid exaggeraed ails, was made by means of an arbirary cu off rule. 3 The highes asse-age was deermined a which a leas a 1% decline in survival was observed, afer which five more years were added. Up unil his age daa were used for analyses. Wihin he period, Capial Sock Survey daa were available for wo separae years for mos indusries. For hese cases wo separae survival funcions were esimaed. A decision had o be made which resuls were considered reliable enough o be used as inpus for capial measuremen purposes. This was done firs of all by visually inspecing he fis of he esimaed survival funcions. If a fied survival funcion had an accepable shape and he esimaed service life seemed reasonable, resuls were considered reliable. The bold figures in he annex represen robus resuls ha were considered reliable enough. Oher figures in he annex originae from oher indusry branches or based on exper guesses because of he low qualiy of he original esimaes. Whenever resuls were available for wo separae years and boh ses of resuls appeared reliable, he average of he wo ses of esimaed parameers was aken as he final resul. When resuls were available for wo separae years and one se of resuls was decided o be more reliable han he oher se, he more reliable se of esimaed parameers was aken as he final resul. When all resuls wihin a cerain indusry branch (by asse ype) were deermined o be of low qualiy, parameers esimaed wihin anoher (as closely relaed as possible) indusry branch (by same asse ype) were adoped insead. The Weibull disribuion funcions were esimaed on he basis of calculaed discard fracions. These discard fracions were being ranslaed in survival raes which are by definiion declining in ime. These by definiion declining survival raes ogeher wih he flexible properies of he Weibull disribuion funcion lead in general o robus esimaes of he average service lives and disribuion paerns. Regarding heir plausibiliy, he resuls give he impression ha he observed discard values are a several cases raher low. In hese cases i seems likely ha some discards were missed by he Survey on Discards. A drawback of he mehod used o calculae he survival funcion is ha missing observaions of in realiy large discards in a cerain year have an impac on he survival funcion as calculaed for he years afer year. Daa were no re-analysed on higher aggregaion levels because his would no add any new informaion. Aggregaion does no solve he problem in hose cases where i is suspeced ha discards are missing. Insead, as shown in he annex, indusry branches wih lower qualiy daa were assigned esimaes based on hose wih higher qualiy daa. 3.4 Deermining service lives of asses in use ouside manufacuring indusries Incidenal informaion on direcly observed capial socks is available for crude oil and naural gas mining (ISIC-11) and he waer disribuion indusry (41). For asse ypes such as indusrial buildings, ransporaion equipmen and compuers his informaion could be used for esimaing service lives. Car regiser informaion was used for deermining he service lives of road ranspor equipmen. Service lives of airplanes were derived from company records of Duch airline companies. The survival funcions of he oher indusry-asse combinaions have been derived from hose found in he manufacuring indusry. In some cases hese were slighly modified when here were reasons o assume divering service lives in he services indusry compared o hose found in he manufacuring indusry. 3 Exaggeraed ails are expeced o occur when discards remained unobserved by he Survey on Discards. 10

11 Where no comparable indusry-asse combinaions were available, survival funcions have been based mosly on lieraure and company records. 3.5 Oher parameers Age-efficiency Usually one may expec a declining performance of asses as a resul of aging. The changing level of capial services an asse is able o produce over is enire service live is refleced by he asse s ageefficiency profile. Empirical informaion on he shape of age-efficiency profiles is scarcely available. In mos cases assumpions mus be made abou he age-efficiency of various asse ypes. Wih regard o he general shape of age-efficiency profiles here are broadly wo choices. A geomeric profile is used by Saisics Canada. This profile assumes he larges absolue declines in service levels a he beginning of an asse s service life. A he Ausralian Bureau of Saisics and he US Bureau of Labour Saisics a hyperbolic profile is used, assuming ha he larges absolue declines occur a he end of an asse s service life. Wihou he availabiliy of any empirical evidence for he Neherlands, a hyperbolic profile is considered he mos plausible one. Hyperbolic age-efficiency profiles were posulaed wih he help of a so-called Winfrey funcion (OECD, 2001, par. 6.75). The β parameer in his funcion deermines he iniial efficiency losses a he beginning of an asse s services lives. The β parameer may vary beween 0 and 1. A value of 1 indicaes a consan level performance, also referred o as a one-horse-shay. We seleced a β value of 0.5 for asse ypes like machinery and insallaions and ranspor equipmen, a value of 0.75 for indusrial buildings and dwellings and a value of 1.0 for compuers, sofware and oher inangible fixed asses Rae of reurn In secion 2 i was explained how ne asse socks are deermined on he basis of ne presen value calculaions of expeced fuure renal flows. The real rae of reurn used for hese esimaions is 4%. Sofar no aenion has been given o differences in expeced risk premiums as hey migh lead o differences in he raes of reurn beween indusry branches. 4. Resuls Table 1 provides a brief overview of adjusmens in consumpion of fixed capial and wealh sock esimaes ha resul from he Duch PIM updae. The adjusmens are divided ino hree main causes: revision of he invesmen ime series, adjusmens in expeced service lives and mehodological changes. The consrucion of a new invesmen ime series and changes in price indexes give rise o posiive adjusmens of boh consumpion of fixed capial and he ne capial sock. The subsanial upward adjusmen of he wealh sock, compared o depreciaion, is due o he fac ha before he revision only he laer was correced for incidenal changes such as second-hand rade in capial goods. The newly esimaed service lives of asses are on average a bi shorer han hose used before he revision. This resuls in higher depreciaion levels and lower ne capial sock esimaes. The ne presen value mehod leads in he year 2001 o a depreciaion level ha is 5.5 percen lower han when using a sraigh-line depreciaion rae. A he same ime, he ne capial sock is 7.5 percen higher. So he ne presen value mehod appears o give on average lower depreciaion raes han sraigh-line depreciaion. 11

12 Table 1: Adjusmens of consumpion of fixed capial and he oal wealh sock of fixed asses as a resul of he revision, he Neherlands, 2001 Consumpion of Toal wealh sock fixed capial of fixed asses % Adjusmens of invesmen and price daa Adjusmens of service lives Mehodological changes Toal adjusmen Table 2 presens he changes in he wealh sock of fixed asses in 2004, grouped ino eigh main asse caegories. The increase in he value of asses was firs of all due o asse price increases, he excepion being compuers. For mos asses fixed capial formaion surpassed depreciaion. However, he values in consan prices of machinery and insallaions, oher angible asses and inangible asses declined in 2004 since for hese asse caegories fixed capial formaion failed o keep up wih depreciaion. On he macro level he oher changes in volumes of asses are paricularly relevan for ranspor equipmen. The negaive change of 2.1 billion Euro mainly concerned sales of auomobiles by lease companies o consumers. This macro presenaion conceals he imporance a he indusry branch, or insiuional secor, level of sales and purchases of dwellings and indusrial buildings. Table 2: A balance shee of he wealh sock of fixed asses by asse ype, he Neherlands, 2004 Opening Revalua- Fixed capial Depre- Oher volume Closing sock ion formaion ciaion changes sock billion Dwellings Indusrial buildings Oher srucures Transpor equipmen Compuers Machinery and insallaions Oher angible asses Inangible asses Toal Figure 1 provides a enaive overview of recen macroeconomic developmens. All daa are derived from he Duch naional accouns and labour accouns. In his figure he annual volume changes of value added are compared wih he annual volume changes of labour and capial inpus. The volume changes of capial inpus are esimaed wih he help of a volume index of capial services. This index refers o fixed asses only. So invenories and non-produced asses are no included. The combined labour-capial volume index is compiled wih he shares of labour and capial in he oal facor coss as weighs. All indexes refer o he business secor. This means ha indusry branches dominaed by nonmarked producers, as well as dwelling services, are excluded. 12

13 Figure 1: Indexes of value added (volume), labour inpu (worked hours) and capial inpus (volume index of capial services) and a combined labour-capial volume index for he Duch business secor Toal inpu Capial inpu Labour inpu Value added These preliminary resuls show a subsanial increase of labour produciviy in he period This labour produciviy gain seems o have been parly he resul of a much higher growh of capial inpu in his period compared o labour (i.e. capial deepening). Since capial inpu growh even surpassed he volume increase in value added, capial produciviy decreased in he period The average annual muli-facor produciviy in his period reached 1.2 percen. 5. Fuure work The revised Duch sysem seems o provide a solid basis for he annual compilaion of balance shees for fixed asses and he compilaion of capial services in curren and consan prices. I is planned o coninue his work a Saisics Neherlands wih he consrucion of balance shees for land and possibly also for oher non-produced asses (naural gas and oil). Recenly, experimenal esimaes were made for knowledge capial resuling from Research and Developmen (De Haan and Rooijen-Horsen, 2004). There are plans o improve hese esimaions and o coninue in 2006 he furher developmen and regular consrucion of knowledge capial (saellie) accouns. This year Saisics Neherlands is in co-operaion wih he Duch Bureau of Economic Policy Analysis involved in he consrucion of a KLEMS (capial, labour, energy, maerials, services) daabase. This work is carried ou as par of he EU KLEMS projec (Van Ark, 2004). Obviously, he achievemens in he field of capial measuremen will serve as one of he main building blocks of he KLEMS daabase for he Neherlands. I is expeced ha is work will lead in he near fuure o he frequen publicaion of produciviy saisics on he macro and indusry branch level as par of he annual naional accouns publicaion of Saisics Neherlands. 13

14 References Ark, B. van (2004) EU KLEMS projec on produciviy in he European Union, paper presened a he Naional Accouns Working Pary May, Eurosa (Luxembourg). Bergen, D. van den, M. de Haan, R. de Heij and M. Horsen (2005) Eindrappor herziening kapiaalgoederenvoorraadsaisiek, BPA-number: MOO, Saisics Neherlands (Voorburg/Heerlen). Commission of he European Communiies, Inernaional Moneary Fund, Organisaion for Economic Co-operaion and Developmen, Unied Naions & World Bank (1993) Sysem of Naional Accouns 1993, Series F, No. 2, Rev. 4, Unied Naions (New York). Eurosa (1996) European Sysem of Accouns, Eurosa (Luxembourg). Haan, M. de and M. van Rooijen-Horsen (2004) Measuring R&D Oupu and Knowledge Capial Formaion in Open Economies, paper presened a he 28h General Conference of The Inernaional Associaion for Research in Income and Wealh, Augus 22-28, Universiy of Cork (Cork). Korn B. and Th. van der Weide (1960) He naionale vermogen van Nederland , Saisische en economerische onderzoekingen, Saisics Neherlands (Voorburg/Heerlen). Meinen, G., P. Verbies and P.P. de Wolf (1998) Perpeual invenory mehod, service lives, discard paerns and depreciaion mehods, Saisics Neherlands (Voorburg/Heerlen). OECD (2001) Measuring capial, a manual on he measuremen of capial socks, consumpion of fixed capial and capial services, OECD (Paris). Smees H.H. and N.H.L. van den Hove (1994) Desinvesmens, Saisics Neherlands (Voorburg/Heerlen). 14

15 Annex Expeced service lives and discard paerns for he manufacuring indusry Figures prined in bold represen real esimaes (a he indusry by asse level). Figures ha are no prined in bold are esimaes borrowed from anoher indusry or impued figures based on exper guesses because of he low qualiy of he original esimaes. Gross fixed capial formaion in 2001 is added as an indicaion of he relaive significance of a paricular indusry branch. Table A1 - Indusrial buildings Indusry e.s.l. alpha lambda Capial formaion (years) 2001 (mln euro) Manufacure of food producs, beverages and obacco 42 2,16 0, Manufacure of exile and leaher producs 42 2,16 0,022 8 Manufacure of wood and wood producs 42 2,16 0, Manufacure of paper and paper producs 42 2,16 0, Publishing and prining 42 2,16 0, Manufacure of peroleum producs 36 1,30 0, Manufacure of basic chemicals, chemical producs and man-made fibres 41 1,77 0, Manufacure of rubber and plasic producs 41 1,77 0, Manufacure of building maerial 42 2,16 0, Manufacure of basic meals 31 1,01 0, Manufacure of fabricaed meal producs 31 1,01 0, Manufacure of machinery and equipmen n.e.c. 44 1,34 0, Manufacure of office machines and compuers 30 1,33 0, Manufacure of (oher) elecronic machinery and equipmen 30 1,33 0, Manufacure of audio-, video- and elecommunicaion equipmen 30 1,33 0, Manufacure of medical insrumens and equipmen 30 1,33 0, Manufacure of cars and railers 36 2,21 0, Manufacure of ranspor equipmen (oher han cars and railers) 36 2,21 0, Oher manufacuring 42 2,16 0, Table A2 - Exernal ranspor equipmen Indusry e.s.l. alpha lambda Capial formaion (years) 2001 (mln euro) Manufacure of food producs, beverages and obacco 6 1,41 0, Manufacure of exile and leaher producs 5 1,13 0,210 5 Manufacure of wood and wood producs 5 1,47 0, Manufacure of paper and paper producs 5 1,27 0,231 3 Publishing and prining 5 2,12 0, Manufacure of peroleum producs 5 1,09 0,220 1 Manufacure of basic chemicals, chemical producs and man-made fibres 7 1,30 0,154 9 Manufacure of rubber and plasic producs 5 1,47 0,193 7 Manufacure of building maerial 5 1,47 0, Manufacure of basic meals 7 2,00 0,134 3 Manufacure of fabricaed meal producs 5 1,47 0, Manufacure of machinery and equipmen n.e.c. 5 1,79 0, Manufacure of office machines and compuers 5 1,47 0,193 1 Manufacure of (oher) elecronic machinery and equipmen 5 1,47 0,193 5 Manufacure of audio-, video- and elecommunicaion equipmen 5 1,47 0,193 1 Manufacure of medical insrumens and equipmen 6 1,46 0,189 5 Manufacure of cars and railers 5 1,47 0,193 9 Manufacure of ranspor equipmen (oher han cars and railers) 5 1,47 0,193 3 Oher manufacuring 7 1,21 0,

16 Table A3 - Machinery and insallaions (including inernal ranspor equipmen) Indusry e.s.l. alpha lambda Capial formaion (years) 2001 (mln euro) Manufacure of food producs, beverages and obacco 27 1,75 0, Manufacure of exile and leaher producs 35 2,50 0, Manufacure of wood and wood producs 30 1,52 0, Manufacure of paper and paper producs 27 1,75 0, Publishing and prining 35 1,53 0, Manufacure of peroleum producs 22 1,49 0, Manufacure of basic chemicals, chemical producs and man-made fibres 30 2,18 0, Manufacure of rubber and plasic producs 30 2,18 0, Manufacure of building maerial 30 1,52 0, Manufacure of basic meals 33 2,50 0, Manufacure of fabricaed meal producs 33 2,50 0, Manufacure of machinery and equipmen n.e.c. 33 2,50 0, Manufacure of office machines and compuers 21 1,83 0, Manufacure of (oher) elecronic machinery and equipmen 18 1,54 0, Manufacure of audio-, video- and elecommunicaion equipmen 18 1,54 0, Manufacure of medical insrumens and equipmen 15 1,27 0, Manufacure of cars and railers 30 2,11 0, Manufacure of ranspor equipmen (oher han cars and railers) 30 1,29 0, Oher manufacuring 30 1,52 0, Table A4 - Compuers Indusry e.s.l. alpha lambda Capial formaion (years) 2001 (mln euro) Manufacure of food producs, beverages and obacco 12 1,50 0, Manufacure of exile and leaher producs 14 1,57 0,066 5 Manufacure of wood and wood producs 8 2,05 0,115 4 Manufacure of paper and paper producs 6 1,32 0, Publishing and prining 8 1,52 0, Manufacure of peroleum producs 8 2,84 0,109 6 Manufacure of basic chemicals, chemical producs and man-made fibres 12 2,03 0, Manufacure of rubber and plasic producs 12 2,03 0, Manufacure of building maerial 8 2,05 0, Manufacure of basic meals 8 2,05 0,115 7 Manufacure of fabricaed meal producs 8 2,05 0, Manufacure of machinery and equipmen n.e.c. 12 1,43 0, Manufacure of office machines and compuers 6 1,55 0, Manufacure of (oher) elecronic machinery and equipmen 6 1,55 0, Manufacure of audio-, video- and elecommunicaion equipmen 6 1,55 0, Manufacure of medical insrumens and equipmen 6 1,55 0, Manufacure of cars and railers 5 1,14 0,268 6 Manufacure of ranspor equipmen (oher han cars and railers) 5 1,14 0,268 9 Oher manufacuring 10 2,25 0, Table A5 - Oher angible fixed asses Indusry e.s.l. alpha lambda Capial formaion (years) 2001 (mln euro) Manufacure of food producs, beverages and obacco 12 1,01 0, Manufacure of exile and leaher producs 12 2,69 0, Manufacure of wood and wood producs 12 1,99 0,028 8 Manufacure of paper and paper producs 12 1,01 0, Publishing and prining 12 1,01 0, Manufacure of peroleum producs 12 1,01 0,042 8 Manufacure of basic chemicals, chemical producs and man-made fibres 12 1,01 0, Manufacure of rubber and plasic producs 12 1,01 0, Manufacure of building maerial 12 1,99 0, Manufacure of basic meals 12 1,50 0,030 3 Manufacure of fabricaed meal producs 12 1,50 0, Manufacure of machinery and equipmen n.e.c. 12 1,50 0, Manufacure of office machines and compuers 8 2,63 0, Manufacure of (oher) elecronic machinery and equipmen 8 2,63 0, Manufacure of audio-, video- and elecommunicaion equipmen 8 2,63 0, Manufacure of medical insrumens and equipmen 12 2,50 0, Manufacure of cars and railers 11 1,43 0, Manufacure of ranspor equipmen (oher han cars and railers) 11 1,43 0, Oher manufacuring 12 1,99 0,