Transcript Slide 1

Measuring Output and
Productivity Growth in Services
Joint product of NESDB and World Bank
Work being down by by a team from the
National Accounts Office
Reasons for Current Interest
 Services are a major source of employment
growth
 Important part of economic infrastructure.
 Major area of innovation (primary user of
ITC capital).
 General Agreement on Trade in Services
(GATS) increased interest in performance of
services.
 Significant influence in competition for
emerging business centers in global
production system.
Objectives
 Review methodology for computing
output and productivity in services.
 Develop a methodology for crossnational comparisons of productivity
performance in specific industries.
 Airlines, Communications, Banking, and
Trucking.
 Valuable benchmark of performance of
critical industries relative to trade
partners.
Problems
 Statistical system collects very little
information on services
 Very true in Thailand
 Reporting system (surveys) dominated by
manufacturing and goods production
 Focus on tradable goods and exports
 Hard to measure real output of services
 Hard to define unit of output
 Lack of price indexes to adjust for inflation
Construction of Growth Accounts
 (1)
 (2)
Qt  At F Kt , Lt 
d ln Q  sk d ln(K )  sl d ln(L)  d ln TFP
 Where:




Q: real GDP
A: TFP – efficiency of factor usage
K: physical capital inputs -stock measure
L*: labor inputs - adjusted for yrs school
L*  e as L
 sk: factor income shares
Growth Accounts (2)
 Computation of factor shares
 Division of value added between capital and labor
compensation
 Income share can be used to measure
contribution in competitive situations
 Mixed income (self-employment) is a combination
of labor and capital income.
 Assume labor component equal to wage of
employees
 Adjust compensation by ratio of total employment
to employees.
 Increases importance of labor in growth accounts
Stages of Presentation
 Macroeconomic Overview
 Total Economy and major sectors
 Agriculture, Industry, and Services
 Structure of Services Sector
 Industry groupings
 General data issues
 Detailed Industries
 Productivity measures
 International comparisons
Macro Overview
Total Economy: Labor Productivity
3.50
1980 = 1.0
3.00
2.50
2.00
1.50
1.00
0.50
0.00
1980
1985
Actual
1990
1995
86-96 trend
2000
99-05 trend
2005
I.Macroeconomic Overview
 Thailand has had a very limited
recovery from 1997-98 financial
crisis.
 Permanent loss of output in levels
context
 Much slower trend growth after crisis
(annual LP growth– 2.6% vs 6.8%)
 Sharply lower rates of capital
accumulation
 Faster growth of Total Factor Productivity
Total Economy: Labor Productivity
3.50
1980 = 1.0
3.00
2.50
2.00
1.50
1.00
0.50
0.00
1980
1985
1990
1995
Actual
86-96 trend
2000
2005
99-05 trend
Sources of Growth, Total Economy
1980-2005
1980-1996
1999-2005
Output
5.9
8.0
5.0
Employment
2.6
3.3
2.4
Output per worker
3.3
4.7
2.6
Capital
2.0
2.7
0.0
Education
0.4
0.4
0.5
Factor Productivity
0.9
1.6
2.2
Contribution of:
Sector Performance
 Agriculture
 Small contribution to growth
 Mechanization (capital) is major source
 Industry
 Historically, most rapid growth
 Large post-crisis decline in capital contribution
 Some TFP offset
 Services
 Decline in capital contribution
 No TFP offset
Agriculture
10.0
8.0
6.0
4.0
2.0
0.0
1980-2005
1980-1996
1999-2005
-2.0
Employment
capital
Education
TFP
Industry
10.0
8.0
6.0
4.0
2.0
0.0
1980-2005
1980-1996
1999-2005
-2.0
Employment
capital
Education
TFP
Services
10.0
8.0
6.0
4.0
2.0
0.0
1980-2005
1980-1996
1999-2005
-2.0
Employment
capital
Education
TFP
Reallocation Gains
 Low labor productivity and TFP growth in
all three sectors
 Contribution of within-sector labor productivity
has declined.
 Large productivity slowdown in industry and
services.
 Large portion of aggregate productivity
growth coming from reallocation of workers
from low-productivity agriculture to highproductivity industry and services.
Reallocations and Sector Contributions to
Productivity Growth
6.0
4.7
5.0
4.0
3.3
2.6
3.0
2.0
1.0
0.0
1980-2005
Agriculture
1980-1996
Industry
Services
1999-2005
Reallocation
Resource Reallocations

V
d ln LP   wi d ln LPi 
 i

V


  ( wi  ei )d ln Li 
 i

Resource Reallocations (2)
 Definitions




LPv = labor productivity (value added)
L = employment
wi = value added share of industry i.
ei = employment share of industry i.
II. Major Service Industries
 Unlike the situation in agriculture and
industry, Thailand collects very little
information about the performance of
services.
 No comprehensive economic census.
 Employment estimates are available only
from the household labor force survey
 Survey works well for major sectors
 But, respondents do not know detailed industry
classification of their employers.
Labor Productivity in Service
Industries
 Real output measures from national
accounts
 Employment estimates from LFS
 Trade, restaurants and transportation are
largest providers of value added and
employment.
 Growth is mot rapid in communications,
and public services.
 Many industries appear to have negative
productivity growth.
 Implausible, and suggestive of measurement
problems.
Output and Labor Productivity Growth,
1993-2005
Annual Growth Rate
Wholesale and Retail Trade
Hotels and Restaurants
Transporation, Storage and Communications
Transportation and Storage
Communications
Finance
Real Estate, Renting and Business Activities
Public Administration and Defense
Education
Health and Social Work
Other Services
Total Services
Share
of GDP
Output
29.5
12.1
17.7
14.1
3.6
9.6
6.0
9.6
8.7
4.0
2.5
100.0
1.9
2.7
6.0
4.6
8.7
-1.9
3.6
4.7
4.3
5.1
8.0
3.1
Output per
Employment
worker
3.3
4.8
1.5
1.6
0.4
1.7
6.1
2.2
2.3
4.5
4.7
3.3
-1.9
-2.7
4.1
2.7
8.2
-3.8
-3.3
2.1
1.5
-0.1
2.3
-0.8
Total factor productivity
 Conversion of capital stock measures
to new industrial classification is still
incomplete
 Severe problems with factor income
shares
 Labor share recorded as very low in
industries such as wholesale and retail
trade and restaurants.
 TFP growth is negative in many
industries
Total Factor Productivity,
1993-2005
Contribution of:
Capital
Education
Wholesale and Retail Trade
Hotels and Restaurants
Transporation, Storage and Communications
Transportation and Storage
Communications
Finance
Real Estate, Renting and Business Activities
Public Administration and Defense
Education
Health and Social Work
Other Services
Total Services
-0.6
-1.8
2.1
1.8
4.2
0.7
-3.1
0.2
0.3
0.4
0.1
0.3
0.1
0.1
0.4
0.5
0.1
0.1
0.0
0.8
0.1
0.0
0.8
0.4
TFP
-1.4
-1.0
1.7
0.5
3.9
-4.6
-0.2
1.1
1.1
-0.5
1.4
-1.5
Overview of Service Industries
Problems
 Suggestion that output and
productivity growth are significantly
understated in several service
industries
 Unresolved conflicts with other data,
such as Business Trade and Service
Survey of NSO
 Difficult to make significant progress
without expanded source data.
Problems (2)
 Need for a decennial census and annual
surveys of service industries.
 Comparable to existing data for manufacturing.
 Questionnaire can be considerably shorter
 Revenue, value added, and investment outlays
are the critical elements.
 Would provide an estimate of employment and
compensation on a basis that matches that of
the production data.
III. Four Detailed Industries
 Airlines, communications, banking,
and trucking
 Important components of logistics
infrastructure for manufacturing and
exports
 Indicative of Thailand’s development as
an international business center
 Attempt benchmark comparisons of
performance relative to trading
partners.
Methodology
 Measure productivity as before, but need to
measure output and inputs in common
international units
 Reluctant to use either commercial exchange
rates or PPPs as they may not be representative
of specific industry
 Try to develop a common physical unit for
output (e.g. airlines and communications)
 In banking, we plan to use commercial
exchange rate.
 OK for labor, and much of capital is purchased in
a common global market.
I. Airlines
 Case study of international comparison
 Can define a unit of output as a ton
kilometer (aggregate passenger and
freight)
 Avoids need to convert from one national
currency to another
 Data are available from individual airlines
 Can basically match the data in Thailand’s
national accounts.
Airline Output Indexes
2.50
NESDB VA
2.20
NESDB GO
1.90
Alternative GO
1.60
1.30
1.00
1993
1995
1997
1999
2001
2003
2005
Alternative Measures of Capital
Input
 Net capital stock of NESDB
 Cumulative of investment with assumed
rate of depreciation
 Issues of leasing and retirement of planes
 Available capacity tons of passengers
and freight
 Available ton-kilometers
 Number of planes aggregated by
relative price.
Airline Capital indexes
1.60
1.40
1.20
1.00
0.80
1997
1998
1999
Price weights
available capacity km
2000
2001
2002
capital stock
available capacity tons
2003
2004
2005
number of planes
2006
Sources of Growth in Airlines, Thailand
1993-2005 1993-1996
Real Output Growth
1999-2005
7.0
10.1
4.6
1.2
1.6
1.0
Employment
1.0
1.6
0.7
Quality
0.2
0.0
0.3
Capital
4.2
6.6
1.9
TFP
1.5
1.7
1.7
Contribution of:
Labor
International Comparisons
Thailand
Malaysia
Singapore
U.S.
Thai Air
Malaysian
SIA
Alaska
Airlines
America West
American
ATA
Continental
Delta
Northwest
Southwest
United
U.S. Airways
International Comparisons
 Output is a weighted average of
passengers (58%) and passenger
ton-kilometers (42%)
 Weights are from a regression of airline
revenues as a function of passengers
and passenger ton kilometers
 Capital is based on available tonkilometers
Airline Labor Productivity
175
U.S. 1991 = 100
150
125
100
75
50
25
1991
1994
Thailand
1997
2000
2003
Singapore
Malaysia
2006
U.S.
175
Airline Capital Productivity
U.S. 1991 = 100
150
125
100
75
50
25
1991
1994
Thailand
1997
2000
2003
Singapore
Malaysia
2006
U.S.
Airline TFP
175
U.S. 1991 = 100
150
125
100
75
50
25
1991
1994
Thailand
1997
Singapore
2000
2003
Malaysia
2006
U.S.
100,000
Compensation per worker, 2005
U.S. Dollars
80,000
82,815
68,722
60,000
40,000
27,678
22,343
20,000
Thailand
Singapore
Malaysia
U.S.
100
Passenger revenue per 1000 Km Flown, 2005
U.S. Dollars
80
71
64
60
60
54
40
20
0
Thailand
Singapore
Malaysia
U.S.
Overview
 Thai Air’s labor productivity is below that of
the United States an Singapore
 Currently offset by lower labor cost
 Gap is slowly widening for both Thai Air and
Malaysia Air
 Capital productivity is comparable to that of
Singapore Airlines
 Overall TFP gains very similar for Thai and
Malaysia
Overview (2)
 Most serious problem is a lack of any
adjustment for quality.
 U.S. productivity gains in recent years may have
been at expense of service quality
 How measure quality?
 Overall performance measures may
camouflage some more specific problems.
 Thai Air has a high load factor on regional
flights, but very low for long distances
 Harder to compete outside of region.
Overview (3)
 Thailand has a significant labor cost
advantage
 Thai Air has a relatively high rate
structure
 Revenue per passenger kilometer
2. Communications
 Industry of very rapid innovation
 Mobile phones
 Broadband and the internet
 Increased competition
 Data within Thailand are very
incomplete
 Grouped with postal service in national
accounts
 Currently relying largely on data from
International Telecommunications
Union
Output Measurement
 Three broad activities of fixed line
service, mobile phones and
broadband
 Current information on broadband
service is incomplete for many countries
 Emphasize fixed line and mobile
 Weigh physical indicators of output
(subscribers) by share of revenue.
 Extraordinarily rapid growth for
Thailand.
Telecommunications Output
Subscribers per 100 population
140
percentage
120
100
80
60
40
20
0
1990
1995
2000
Year
Thailand
USA
Malaysia
2005
Labor Productivity
 Mobile systems are much cheaper to
construct than fixed line and less labor
intensive.
 Questions about employment data in recent
years
 Reported numbers are volatile and may not
consistently include all of the major companies
 Emergence of mobile led to very rapid rise
in labor productivity
 Less dramatic for the United States, which had a
large investment in fixed lines.
Labor Productivity
Ouput per Employee
700
percentage
600
500
400
300
200
100
0
1990
1995
2000
Year
Thailand
USA
Malaysia
2005
Capital
 National Accounts Office does not produce a
measure of capital stock at level of
telecommunications.
 Not sure of source for report to ITU and the
coverage of that data
 Expect large gains in capital productivity in
those countries where mobile substitutes
for building a fixed line system.
 In Thailand, mobile phone subscribers far
outnumber fixed line subscribers (33 million
versus 7 million).
Capital Productivity
Ouput per Unit of Capital
3.5
percentage
3
2.5
2
1.5
1
0.5
0
1990
1995
2000
Year
Thailand
USA
Malaysia
2005
Overview
 Thailand’s telecommunications industry has
developed at an extraordinary rate with
very large efficiency gains by relying on a
mobile system
 Refinement of our estimates is dependent
upon documenting the reliability of the data
 Uncertain about the measures of employment
and capital investment
 If coverage is incomplete, the efficiency gains
would be overstated.
3. Banking
 Difficult to measure output of
financial services industry
 No simple unit of service
 Banks cross-subsidize some services,
providing free depositor services to
attract funds.
 Cannot use revenue shares to aggregate
the different type of services
 Industry is also distorted in Thailand
by aftermath of financial crisis.
Output Measures
 Currently we focus on traditional
commercial banking
 New services are still a small share of total
revenues
 Emphasize transactions in the area depositor
services and loan activities
 Three available measures of deposit
transactions: total number of accounts,
check transactions, and ATM transactions
 Checks are not an important payment
mechanism in Thailand
 Two measures of loan activities: total
number of loans and number of credit cards
Output Measures (2)
 Obtain weights to combine the various
measure by surveying banks for their
experience.
 Number of transactions per deposit account
 Relative allocation of costs between loan and
deposit sides of business.
 Current estimates are only illustrative
 Transactions measure implies much greater
recovery after 1997-98 crisis than current
estimates in national accounts.
Banking Output
1.200
1.000
index
0.800
0.600
0.400
0.200
0.000
1997
1998
1999
2000
2001
2002
2003
2004
year
transactions
NA finacial intemdeiation
2005
2006
Employment and Capital Inputs
 Employment steadily declined after 1997
 30% decline between 1997and 2002
 Increases only in last few years
 Measure reported in the Labor Force Survey is
higher and more volatile.
 Estimate of capital stock is obtained from
National Accounts Office.
 Declined by about 20 percent between
1997 and 2002; growing in recent years.
Employment
200,000
180,000
160,000
thousands
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
1990
1995
2000
year
BOT Reports
Labor Force Survey
2005
Banking: Labor Productivity
3
2.5
index
2
1.5
1
0.5
0
1997
1998
1999
2000
2001
2002
2003
2004
year
transactions
National Accounts
2005
2006
Banking: Total Factor Productivity
1.4
1.2
index
1
0.8
0.6
0.4
0.2
0
1997
1998
1999
2000
2001
2002
2003
2004
year
transactions
NA financial intermediation
2005
2006
Overview
 In contrast to national accounts
measure, the transactions-based
estimate implies strong productivity
gains in last decade.
 Large gains in labor productivity
probably reflect increased use of ITC
capital and technology.
4. Trucking
 Important part of logistics system.
 Very little freight is handled by the railway.
 Output is measured as ton-kilometers of
intercity freight.
 Previously estimated from surveys of trucks on
major routes.
 Recently abandoned because of complaints
about traffic backups.
 Currently extrapolated from data on production
of different types of commodities.
Trucking (2)
 No available estimate of employment
 LFS very volatile
 Assume one driver per truck, but have
no means of estimating other workers
 Capital stock can be estimated from
motor vehicle registration data
Preliminary Productivity Estimates
 Shipments implies much faster growth than
reported in the national accounts.
 4.8 percent per annum ro 1995-2005, compared
with NA estimate of 0.6 percent.
 Employment as measured by number of
trucks, grew at 0.5 percent per annum.
 Capital stock has grown at 2.5 percent.
 Shift to larger trucks for intercity freight
 Modest growth in TFP– 0.7% per annum
Summary
 Four these four industries, we can construct
measures of output and economic efficiency.
 Limited by lack of data
 Much of the information came from outside the
government statistical system
 In general, growth of output and productivity
is considerably better than implied by service
sector of national accounts.
 We need to do more work for the
international comparisons
 Can be done for airlines and telecommunications
 Comparisons for banking and trucking will be
more restricted.
Summary (2)
 Extension of analysis of other service
industries is restricted by the lack of
statistical information comparable to that of
industry.
 Many of the statistical problems could be
resolved by expanding the economic
censuses and annual surveys currently
being done for good production to services.
 Most of Thailand’s future growth and
employment will be in services, but little is
known about the sector’s performance.