The Measurement of Nonmarket Sector Outputs and Inputs Using Cost Weights
AbstractIn many sectors of the economy, governments either provide various services at no cost or at highly subsidized prices. Examples are the health, education and general government sectors. The System of National Accounts 1993 recommends valuing these nonmarket outputs at their costs of production but it does not give much guidance on exactly how to do this. In this paper, an explicit methodology is developed that enables one to construct these marginal cost prices. However, in the main text, an activity analysis approach is taken in order to simplify the analysis, so in particular, constant returns to scale, no substitution production functions for the specific activities in the nonmarket sector are assumed. It is shown that it is possible to obtain meaningful measures of Total Factor Productivity growth in this framework. An Appendix relaxes some of the restrictive assumptions that are used in the main text.
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Bibliographic InfoPaper provided by UBC Department of Economics in its series UBC Departmental Archives with number diewert-08-01-18-09-21-07.
Length: 24 pages
Date of creation: 18 Jan 2008
Date of revision: 13 Nov 2008
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Measurement of output; input and productivity; nonmarket sector; health; education; general government; cost functions; duality theory; marginal cost;
Find related papers by JEL classification:
- C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
- E23 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Production
- H40 - Public Economics - - Publicly Provided Goods - - - General
- H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
- H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
- I10 - Health, Education, and Welfare - - Health - - - General
- I20 - Health, Education, and Welfare - - Education - - - General
- O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
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