EU KLEMS project on Productivity in the European

Union

Presentation for Working Group on National AccountsEurostat, Luxembourg, 16 May 2005

Bart van Ark (Groningen Growth and Development Centre, University of Groningen)

This project is funded by the European Commission, Research Directorate General as part of the 6th Framework Programme, Priority 8, "Policy Support and Anticipating Scientific and Technological Needs".

Main characteristics of EU KLEMS

• EU KLEMS project is 3-year statistical and analytical research project funded by 6th Framework Programme

• Purpose is to create a database on growth accounts by industry (NACE 60+) for EU member states with a breakdown into contributions from capital (K), labour (L), energy (E), materials (M) and service inputs (S)

• Full coverage of “old” EU-15 plus 5 new member states (PL, SK, HU, CZ and SI)

• Limited coverage of other 5 new member states (CY, MT, LT, LV and EE)

• Also comparisons with U.S., Canada and Japan

• 1970-2005, with greatest detail for post-revision period

• 15 research institutes across Europe, led by GGDC and NIESR

• In 2nd phase conduct a number of analytical research projects

Setup of project: Workpackages

WP1 ResearchInter-industry papers

accounts

WP2 ResearchLabour papers

accounts

WP3 ResearchCapital flow papers

accounts

WP4 ResearchRelative papers

price levels

Progress andInnovation

LinkagesWP10

with Firm-

W

P7:

An

aly

sis

of

LP,

TF

P,

pri

ces a

nd

str

uctu

reLevel Data-Bases

WP 11: Communication and Dissemination

WP9

WP6: Statistical Roadmap and Statistical Implementation Planin consultation with Eurostat and National Statistical Institutes

WP8Labour Markets

W

P5:

Data

base d

evelo

pm

en

t

Technological

andSkill Formation

NSI’s have actively contributed to EU KLEMS

• Three status positions:

• Subcontracting: Statistics Finland, ISTAT, Statistics Netherlands

• Participatory status: Statistics Sweden, STATEC (Luxembourg), ONS

• Observer status: INSEE, Statistics Denmark, Statistisches Bundesamt, Institute of National Statistics (Belgium), Statistics Austria, Statistics Ireland, INE, Statistical Office Slovakia, Statistical Office Poland, CSO Hungary, Czech Statistical Office, Statistical Office Slovenia

• Contacts under development:

• Greece, Portugal, Lithuania, Latvia, Estonia, Cyprus, Malta

• Also contacts with:

• USA (Harvard University, BEA, BLS),Japan (RIETI, Hitotsubashi), Canada (Statistics Canada)

• OECD (Statistics Dept., DSTI)

• Activities• Internal Consortium meetings in Helsinki (June 2005) and Valencia (May

2006)

• Workshops on WP1 (output and intermediate inputs) in September (Groningen) & WP2 (labour accounts) in November (London)

• Project presentations at EU level (NAWG Eurostat, June 2005; EPC, May 2005) and OECD level (Productivity Conference Madrid, October 2005)

• Some national presentations of preliminary project results (Sweden, Austria, Netherlands)

• Data collection & processing WP’s• Additional data collection and advice from NSI’s

• Processing and construction of preliminary database

• End of March 2006: release of preliminary analytical database (also available on country-by-country basis for NSI’s)

• April: begin of feedback phase from NSI’s

EU KLEMS milestones June 05 – May 06

The Underlying Structure of the EU KLEMS Growth and Productivity Accounts

EU KLEMSConsortiumPartner

National Statistical Office

E2. Public Output

Statistical module

A. Basic data

E1. EU KLEMS Public Output

Analytical module

B. Readable format (incl. meta-data)

C. Input KLEMS

data

D. Output KLEMS

data

NSO-approved input & output data

ProdSys

1 2 3 4 5

6 6 6

EU KLEMS Output Data are Defined

ValuesGO Gross output at current basic prices (in millions of local currency)II Intermediate inputs at current purchasers' prices (in millions of local currency)IIE Intermediate energy inputs at current purchasers' prices (in millions of local currency)IIM Intermediate material inputs at current purchasers' prices (in millions of local currency)IIS Intermediate service inputs at current purchasers' prices (in millions of local currency)VA Gross value added at current basic prices (in millions of local currency)LAB Labour compensation (in millions of local currency)CAP Capital compensation (in millions of local currency)CAPIT ICT capital compensation (in millions of local currency)

VolumesGO_QI Gross output, volume indices, 1995 = 100II_QI Intermediate inputs, volume indices, 1995 = 100IIE_QI Intermediate energy inputs, volume indices, 1995 = 100IIM_QI Intermediate material inputs, volume indices, 1995 = 100IIS_QI Intermediate service inputs, volume indices, 1995 = 100VA_QI Gross value added, volume indices, 1995 = 100LAB_QI Labour services, volume indices, 1995 = 100CAP_QI Capital services, volume indices, 1995 = 100CAPIT_QI ICT capital services, volume indices, 1995 = 100LP_I Gross value added per hour worked, volume indices, 1995=100CAPIT_QPH ICT capital stock per hour worked, 1995 referenceCAPNIT_QPH Non-ICT capital stock per hour worked, 1995 reference

EU KLEMS Output Data are Defined

Growth accountingVA_Q Growth rate of value added volume (% per year)VAConL Contribution of labour to value added growth (percentage points)VAConK Contribution of capital services to value added growth (percentage points)VAConTFP Contribution of TFP to value added growth (percentage points)GO_Q Growth rate of gross output volume (% per year)GOConII Contribution of intermediate inputs to output growth (percentage points)GOConL Contribution of labour to output growth (percentage points)GOConK Contribution of capital services to output growth (percentage points)GOConTFP Contribution of TFP to output growth (percentage points)

Additional variablesCOMP Compensation of employees (in millions of local currency)GOS Gross operating surplus (in millions of local currency)TXSP Taxes minus subsidies on production (in millions of local currency)Hours Total hours worked (millions)Emp Number of persons engaged (thousands)Empe Number of employees (thousands)

Statistical vs. analytical modules of database

Analytical module of the database• Core of the EU KLEMS database

• Uses “best practice” techniques in area of growth accounting

• Focuses on international consistency

• Aim is full coverage (country * industry * variable) for revision period

• Consider alternative or pioneering assumptions (e.g., output and price measurement of ICT goods and non-market services, measurement of skill levels, construction of capital services, capitalization of intangible assets).

• Analytical database is a research data base and are not official statistics

Statistical module of the database:• Developed parallel to the analytical module

• Data consistent with those published by NSIs

• Methods according to rules and conventions on national accounts, supply and use tables, commodity flow methods, etc. (SNA 1993, ESA 1995) or at least supported by NSI’s

• Statistical module meets statistical standards of NSI's and Eurostat and can eventually be incorporated in their present statistical practices and in New Cronos.

Status of Preliminary Analytical Dataset

• Present dataset is Preliminary Analytical Module (country output files available to individual NSI’s)

• Harmonisation that has been realized (see Sources and Methods documentation)

• Industrial classification: A60+ (up to 72)

• Aggregation levels: flexible

• Reference year for volume measures: 1995

• Price concepts: basic prices for gross output; purchaser prices for intermediate inputs

• Solving breaks: splicing method

• Labour input concept: total hours actually worked (where possible with breakup in “persons” and “hours per person”

• Asset classification: minimum of 11 asset types, incl. 3 ICT breakdown

• Capital services input: on basis of endogenous calculation

• Multifactor productivity measure

Status of Preliminary Analytical Dataset

• Harmonisation not yet realized

• Coverage: industry detail, years, countries

• Correction for FISIM, in particular backwards

• ICT deflators for output and investment: U.S. hedonic or national deflators

• Labour quality: country-specific approach, with cross-country linkage through university graduation

• A large number of smaller issues

• System of adequate quality control under development

• Consortium EU KLEMS partner checks input data

• Central EU KLEMS hubs (Groningen/NIESR) check consistency, concepts, concordances, other sources for EU KLEMS input data

• Central EU KLEMS hubs (Groningen/NIESR) check consistency, breaks, outliers for EU KLEMS output data

• Consortium partner/NSI/Eurostat: feedback and validation of EU KLEMS output

• Consortium: stress testing on plausibility and international comparison

Targets are defined for each variable in EU KLEMS database

Feedback and validation from NSI’s

• Feedback needed on analytical module and validation of statistical module:

• Initial overall assessment of the quality of the data presently used

• Which series could in principle be included in the statistical module

• Which additional series could be used in the statistical module

• Which additional series may still be provided for use in the analytical module

• What will EU KLEMS publish?

• EU KLEMS only publishes end series (see present output files) and not basic data (such as capital-asset matrices or SUT’s)

• Consortium decides on publication of end series in analytical module taking into account NSI feedback

• NSI’s need to validate statistical modules – and those are only ones used for New Cronos and for Commission analysis

• Full integration of Analytical and Statistical modules is ultimate aim, but for many countries not achievable in framework of this project

• Discussions on statistical implementation will start after release of first public version of data base

Time frame

• Local consortium partners will arrange feedback meetings with NSI’s before 30 June

• Feedback to Eurostat (Arturo.de-la-Fuente@cec.eu.int) before 16 July

• EU KLEMS consortium will process (if feasible) feedback and new data until mid September

• First full version available on 31 October 2006

• About three months of quality checks and stress testing (incl. EU KLEMS Data Co-ordination Group meeting)

• November 2006: Final discussion at NAWG for preparation of statistical modules

• End 2006/2007: public release of EU KLEMS analytical module and subsequent (gradual) release of statistical modules

• 2007: development of Statistical Implementation Plan

• End of 2007: 2nd release and publication of 2 or 3 volume series on EU KLEMS (methodology, comparative country studies and analytical research)

Contact Details

• Bart van Ark (project director)Groningen Growth and Development Centre,University of GroningenPO Box 800, 9700 AV GroningenTelephone: +31 50 363 3674E-mail: h.h.van.ark@rug.nl

• Gerard Ypma (project administrator)Groningen Growth and Development Centre,University of Groningen

PO Box 800, 9700 AV Groningen Telephone: +31 50 363 4838E-mail: g.ypma@rug.nl

• E-mail: euklems@eco.rug.nl

• Website: http://www.euklems.net