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The Measurement of Nonmarket Sector Outputs and Inputs Using Cost Weights

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  • Diewert, Erwin

Abstract

In 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.

Suggested Citation

  • Diewert, Erwin, 2008. "The Measurement of Nonmarket Sector Outputs and Inputs Using Cost Weights," Economics working papers diewert-08-01-18-09-21-07, Vancouver School of Economics, revised 13 Nov 2008.
    • Handle: RePEc:ubc:bricol:diewert-08-01-18-09-21-07
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    File URL: http://www.econ.ubc.ca/diewert/dp0803.pdf
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    Citations

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    Cited by:

    1. Andrew Sharpe & John Tsang, 2019. "A Detailed Analysis of Newfoundland and Labrador's Productivity Performance, 1997-2018," CSLS Research Reports 2019-06, Centre for the Study of Living Standards.
    2. Carol Corrado & Mary O'Mahony & Lea Samek, 2020. "Measuring education services using lifetime incomes," Economic Statistics Centre of Excellence (ESCoE) Discussion Papers ESCoE DP-2020-02, Economic Statistics Centre of Excellence (ESCoE).
    3. W. Diewert, 2011. "Measuring productivity in the public sector: some conceptual problems," Journal of Productivity Analysis, Springer, vol. 36(2), pages 177-191, October.
    4. Ruolz Ariste & Kam Yu, 2017. "Comparisons of hospital output in Canada: national and international perspectives," International Journal of Health Economics and Management, Springer, vol. 17(4), pages 433-451, December.
    5. Ricardo de Avillez, 2014. "A Detailed Analysis of Productivity Trends in the Canadian Forest Products Sector," CSLS Research Reports 2014-01, Centre for the Study of Living Standards.
    6. Gang Liu, 2015. "A stylized satellite account for human capital," Discussion Papers 816, Statistics Norway, Research Department.
    7. Andrew Sharpe & Ricardo de Avillez, 2012. "A Detailed Analysis of Nova Soctia;s Productivty Performance, 1997-2010," CSLS Research Reports 2012-05, Centre for the Study of Living Standards.
    8. Evan Capeluck, 2016. "A Comparison of Australian and Canadian Productivity Performance: Lessons for Canada," CSLS Research Reports 2016-07, Centre for the Study of Living Standards.
    9. Leonard I. Nakamura, 2010. "Intangible Assets And National Income Accounting," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 56(s1), pages 135-155, June.
    10. Thiess Büttner & Robert Fenge & Oliver Roehn & Thomas Strobel, 2012. "Der Beitrag des öffentlichen Sektors zur Wertschöpfung: Messprobleme und Lösungsansätze," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 56, October.
    11. Wulong Gu & Jiang Li, 2015. "Productivity in Residential Care Facilities in Canada, 1984-2009," International Productivity Monitor, Centre for the Study of Living Standards, vol. 29, pages 18-37, Fall.
    12. Erwin Diewert, 2010. "Understanding PPPs and PPP-Based National Accounts: Comment," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(4), pages 36-45, October.

    More about this item

    Keywords

    Measurement of output; input and productivity; nonmarket sector; health; education; general government; cost functions; duality theory; marginal cost;
    All these keywords.

    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 - - 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, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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