This presentation was made by Peter Van de Ven, OECD, at the 12th Annual Meeting on Performance and Results held at the OECD, Paris, on 24-25 November 2016

1. MEASURING GROWTH AND
PRODUCTIVITY OF GOVERNMENT
SERVICES IN NATIONAL
ACCOUNTS
Peter van de Ven
Head of National Accounts
OECD
12th Annual Meeting of the OECD Senior Budget
Officials Performance and Results Network
November 24 – 25, 2016

2. 2
Introduction

3. 3
Introduction
• Economic Growth = change in the volume of goods and
services produced
• Change in volume ≠ change in quantity, volumes reflect
both changes in quantity and changes in quality
• For market goods and services, volume measurement is
usually done by deflating changes in monetary value
• But what about non-market (government) type of
services?

4. 4
Non-market (or government) services
• No market prices available
• Output value = sum of costs = wages + intermediate
consumption + consumption of fixed capital (+ return on
invested capital)
• Two basic methods for measuring volume changes:
– Input method: Deflating the various input components (basic
underlying assumption: no change in (multifactor) productivity
– Output method: Looking at indicators for the developments in
the output of relevant services
• Considered very important, as it directly impacts on
estimates for economic growth (>20% of GDP, and
growing)

5. 5
Non-market (or government) services
• In measuring the volume of output, important to
distinguish between:
– Activities: e.g., number of operations, number of in-
patient days
– Output: e.g., number of treatments
– Outcome: e.g., average number of health years
• Output = outcome that can be attributed to the
relevant production process (not to other external
factors!)

6. 6
Non-market (or government) services
Basic distinction:
• Collective services: services provided simultaneously
to all members of (a particular section of) the community;
does not require specific action on the part of the
consumer
– Examples: defence, police, public administration
• Individual services: possible to observe the acquisition
of the service by an individual (household)
– Examples: health, education

7. 7
Volume measurement of collective
services
• Often the service output is not clearly defined …
• … and if more clarity, lack of clearly defined performance
indicators …
• … which are representative of the whole range of
services provided …
• … and which also reflect changes in quality
appropriately
• Note: Risk of counterintuitive and perverse impact of
partial output indicators
• In national accounts: bye and large input method is
being applied

8. 8
Volume measurement of collective
services

9. 9
Volume measurement of individual
services
• For individual non-market services more and more countries
use output-based indicators, especially for health and
education
• Within the EU, even obligatory to use an output method,
however adjustments for quality are explicitly excluded (see
ESA 2010, chapter 10)
• Education: e.g., weighted growth in number of students
(achieving exams), number of student-hours
• Health: e.g., weighted growth in number of treatments
• General problem areas:
– Defining and measuring homogeneous services
– Detailed data for the weights of the various services
– Capturing quality changes

10. 10
Health
• Generalised and specialised hospitals, residential
health care services, medical and dental services,
other human health services
– Market output: usually deflation method
– Non-market output:
• either output method based on Diagnosis Related Groups
(DRGs) or number of days/residents in the case of residential
health care
• or output-based deflation method using “quasi-prices”
• in some countries input method
• Quality adjustments
– May be (partially) captured by applying very detailed breakdowns
into relatively homogeneous products
– Three countries reported quality adjustments for general
hospitals: survival indices, re-admissions, patient experience,
and quality adjusted life years

11. 11
New developments: disease classes
instead of treatment (USA-research)

12. 12
Education
• Generally:
– output method based on pupil-hours or pupils/students, stratified
by type of education
– no explicit adjustments for quality
• Various discussions on the inclusion of quality
indicators, e.g. class size, teacher’s quality, school
inspection reports, student satisfaction surveys,
examination results, grades, student progression/drop-
out rates, future income
• Main issues: consistency over time, timing issues, other
factors affecting the indicators, indicator-driven policy,
etc. …
• … but also weights to be given to impacts of quality
adjustments

13. 13
Main conclusions
• A lot of work has been done and is underway, especially
in the field of health and education, but it is also clear …
• … that much more work needs to be done, and …
• … that measuring changes in quality remains the biggest
challenge
• Having output methods for collective services is not
considered a priority, but …
• … additional work at the micro level may support future
developments at the macro level

14. A health warning!
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15. 15
A final recommendation

16. Thank you for your attention!
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