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Improving the SNA: Alternative Measures of Output, Input, Income and Productivity for China

Author

Listed:
  • Chihiro Shimizu
  • Erwin Diewert
  • Koji Nomura

Abstract

The paper defines and computes alternative measures of output, input and Total Factor Productivity (TFP) for the production sector of the Chinese economy. The current System of National Accounts (SNA) input measure that corresponds to Gross Domestic Product (GDP) does not measure the income generated by the production sector since it includes depreciation and excludes capital gains and losses on assets used in the production sector. The paper suggests an accounting framework that addresses these problems with the existing SNA gross income measure and implements a net income measure using the Augmented Productivity Database (APDB) developed by Asian Productivity Organization and Keio University for China over the years 1970-2020. Real gross and real net income generated by the Chinese production sector is decomposed into explanatory factors including TFP growth using the framework suggested by Jorgenson and Diewert and Morrison. TFP growth is further decomposed into technical progress and inefficiency components using the nonparametric approach developed by Diewert and Fox. The APDB has estimates for the price and quantity of agricultural, industrial, commercial and residential land used in China. The paper argues that changes in land use should be treated in the same manner as inventory change and added to the alternative output measures. It turns out that Jorgensonian user costs for land are frequently negative. The problems associated with negative user costs are discussed in the paper.

Suggested Citation

  • Chihiro Shimizu & Erwin Diewert & Koji Nomura, 2023. "Improving the SNA: Alternative Measures of Output, Input, Income and Productivity for China," Working Papers e178, Tokyo Center for Economic Research.
    • Handle: RePEc:tcr:wpaper:e178
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    References listed on IDEAS

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    1. Diewert, W E, 1974. "Intertemporal Consumer Theory and the Demand for Durables," Econometrica, Econometric Society, vol. 42(3), pages 497-516, May.
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    3. W. Erwin Diewert & Jan de Haan & Rens Hendriks, 2015. "Hedonic Regressions and the Decomposition of a House Price Index into Land and Structure Components," Econometric Reviews, Taylor & Francis Journals, vol. 34(1-2), pages 106-126, February.
    4. T. K. Rymes, 1983. "More On The Measurement Of Total Factor Productivity," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 29(3), pages 297-316, September.
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    7. John R. Hicks, 1961. "The Measurement of Capital in Relation to the Measurement of Other Economic Aggregates," International Economic Association Series, in: D. C. Hague (ed.), The Theory of Capital, chapter 0, pages 18-31, Palgrave Macmillan.
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    Cited by:

    1. Chihiro Shimizu & Yongheng Deng & Tomoo Inoue & Kiyohiko Nishimura, 2024. "Demographics Outlook, Credit Conditions, and Property Prices," Working Papers e198, Tokyo Center for Economic Research.
    2. Josh Martin & Rebecca Riley, 2023. "Productivity measurement - Reassessing the production function from micro to macro," Working Papers 033, The Productivity Institute.

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