Addressing cross-cutting issues for SPPI’s – 2008 Revision

Matt Berger

23rd Voorburg Group, Aguascalientes,

Mexico 2008

Voorburg 2008 ONS - Cross Cutting Issues for SPPI's - 2008 Revision, 22-26 September 2008

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Why are we here?

• Establishing internationally comparable methodologies for service sector GDP

– “Constant dollar output of the service industries”

• Emphasis on SPPI’s, classifications and turnover surveys

– And bringing them together for service sector GDP

Voorburg 2008 ONS - Cross Cutting Issues for SPPI's - 2008 Revision, 22-26 September 2008

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Revision?

Voorburg 2008 ONS - Cross Cutting Issues for SPPI's - 2008 Revision, 22-26 September 2008

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Revision!

• Need identified at 21st Voorburg Group, Wiesbaden 2006

• Presented at 22nd Voorburg group, Seoul 2007– Discussion– Clarifications and suggested changes

• Paper updated– Presentation will focus on key issues

Voorburg 2008 ONS - Cross Cutting Issues for SPPI's - 2008 Revision, 22-26 September 2008

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Product versus Industry

• National accounts require product level SPPI’s

• Industry SPPI’s exist because– National statistics office historical infrastructure– Multiple uses of SPPI’s

• Deflators, upstream indicators of inflation, contracts, international comparison

• Use of industry SPPI’s not appropriate– Except under strict assumptions regarding secondary

production & quality

Voorburg 2008 ONS - Cross Cutting Issues for SPPI's - 2008 Revision, 22-26 September 2008

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Scope of SPPI’s

• National accounts require SPPI’s to measure all outputs of service sector– Not just business-to-business– Not just domestic sales

• Exports of services can occur even though service delivered within geographic boundaries– Non-resident purchaser

• Difficulties might arise in separately identifying export transactions– But different destination mean different products

Voorburg 2008 ONS - Cross Cutting Issues for SPPI's - 2008 Revision, 22-26 September 2008

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Methods based on working time

• Pricing method results in biased measures of GDP– Except for supply of personnel type services

• Arise frequently in practice because:– Model pricing too burdensome– Pricing mechanisms use working time

• Steps to mitigate bias– Only partial - bias still exists!

• Suitable only when consistent relationship between constant quality price of the service and labour inputs– Need to determine when this relationship changes

• Subcontracting!

Voorburg 2008 ONS - Cross Cutting Issues for SPPI's - 2008 Revision, 22-26 September 2008

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Changes to the production function

• Changes to production function might change the service– IT changes typical example

• SPPI measurement needs to identify– When change occurs– Whether products have changed

Voorburg 2008 ONS - Cross Cutting Issues for SPPI's - 2008 Revision, 22-26 September 2008

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Bundling

• Feature of a pricing mechanism

• Resolved via component approach– difficult in practice

• Aggregate of components may cross “product classification” lines– “Logistic solution” includes freight plus storage

• Common problem across all price indices– Work with Ottawa Group?

Voorburg 2008 ONS - Cross Cutting Issues for SPPI's - 2008 Revision, 22-26 September 2008

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Questions?

• Thank you