COMPARABILITYOFSAVINGANDPROFITRATIOSOECDNationalAccountsExpertsMeetingChateaudelaMuette,Paris7-10October2003BackgroundDiscussionofalternativehouseholdsavingmeasuresatOctober2002NAEMECB/OECDprojectDetailedexaminationofinstitutionalsectoraccountsfortheeuroarea,theUnitedStatesandJapanwithparticularemphasisonhouseholdsavingratios,profitratiosandinvestmentratiosScopeofthispaperHouseholdsavingratiosProfitratiosHouseholdsavingratiosIssuesrelatingtothebasicmeasureofthehouseholdsavingratioGrossornet?IncludeNPISH?ChangeinnetequityofhouseholdsonpensionfundsAdjustedhouseholddisposableincomeProposeddefinitionforuseinOECDStatisticalDatabases(includingAnnexTable24ofEconomicOutlook)FurtheradjustmentstothehouseholdsavingratioStatisticalAnnexTable24,OECDEconomicOutlookReproducedasTable1-showshouseholdsavingratiosfor21membercountriesFootnotestothistableindicatedifferencesinthedatacurrentlybeingpublishedforvariouscountriesOECDEconomicsDepartmenttendstousemeasuresforthehouseholdsavingratioandothervariablesthatwillbereadilyrecognisedinthemembercountriesHencewhatispublishedbymembercountriesintheirownnationalaccountshasaneffectoninternationalcomparabilityGrossornethouseholdsavingNetisthepreferredmeasureOnlyusegrossifCOFCestimatesaredeficientDatafor7countriesiscurrentlyshowngrossRecommendation1:Itisrecommendedthatthesevencountries(Belgium,Denmark,Italy,Portugal,Spain,SwitzerlandandtheUnitedKingdom)includehouseholdsavingratiosintheirnationalaccountspublicationsonanetbasisinsteadof,orinadditionto,thegrossmeasures.IncludeNPISHDatafor5countriescurrentlyexcludeNPISHRecommendation2:Intheinterestsofinternationalcomparabilityitisrecommendedthatthefivecountries(CzechRepublic,Finland,France,JapanandNewZealand)alsoincludehouseholdsavingratiosforhouseholdsincludingNPISHintheirnationalaccountspublications.ChangeinnetequityofhouseholdsonpensionfundsCurrentdefinition:B8/(B6+D8)WhereB8=NethouseholdsavingB6=NethouseholddisposableincomeD8=ChangeinnetequityofhouseholdsonpensionfundsTable2provideshouseholdsavingratiosusingthisformulaanddatafromtheOECDannualSNA93databaseRecommendation3:Itisrecommendedthatcountriesthathaveanon-nilvaluefortheadjustmentforthechangeinequityofhouseholdsonpensionfunds(D8)shouldverifythattheirownsavingratiosareconsistentwiththisdefinition.AdjustedhouseholddisposableincomeNewconceptsintroducedinSNA93CollectiveandindividualconsumptionforgeneralgovernmentSocialtransfersinkindActualfinalconsumptionAdjustedhouseholddisposableincomeNewaccountinSNA93UseofadjusteddisposableincomeaccountTheseenableamoreinternationallycomparablehouseholdsavingratiotobecomputedAdjustedhouseholddisposableincome(cont)Nethouseholdsaving(B8)/[Netadjustedhouseholddisposableincome(B7)+Adjustmentforthechangeinequityofhouseholdsonpensionfunds(D8)]Table3provideshouseholdsavingratiosformembercountriesusingthisdefinitionandusingdatafromtheOECDannualSNA93database.Table4showsthedifferencesbetweenthismeasureandthecurrentmeasureforthehouseholdsavingratioshowninTable2.ProposeddefinitionforthehouseholdsavingratioRecommendation4:ThehouseholdsavingratioforinclusioninOECDStatisticalDatabases(includingAnnexTable24oftheOECDEconomicOutlook)shouldbedefinedasfollows:Nethouseholdsaving(B8)/[Netadjustedhouseholddisposableincome(B7)+Adjustmentforthechangeinequityofhouseholdsonpensionfunds(D8)]TheratioshouldbecalculatedincludingNPISHforthepresent.Proposeddefinitionforthehouseholdsavingratio(cont)Itisalsorecommendedthatcountriespublishthismeasureofhouseholdsavingintheirownnationalaccountspublicationsinadditiontothetraditionalmeasure.Question:Arethosecountriesthatpublishquarterlyhouseholdsavingratiosabletoprovideestimatesforindividualconsumptionforgeneralgovernmentonaquarterlybasis?AdjustmentstothehouseholdsavingratioCapitalgainstaxesDirecttaxesversustaxesonproductionandimportsRealnetinterestpaymentsforhouseholdsHouseholddurablesPotentialandrealisedcapitalgains/lossesOtherissuesregardingpensionsTreatmentofunincorporatedenterprisesFinancialaccountsmeasureAdjustmentstothehouseholdsavingratio(cont)StatisticsDirectorateisworkingtowardsalternativesavingmeasuresNeedtorecognisethelimitationsofsomeoftheproposedadjustmentssinceitcannotbeassumedthattheeconomicbehaviourofhouseholdswouldbeunaffectedifdifferentinstitutionalarrangementsactuallyexistedinparticularcountries.CapitalgainstaxesProposedadjustmentTreatcapitalgainstaxesascapitaltransfersratherthancurrenttransfersAddbackcapitalgainstaxestohouseholdsavingandhouseholddisposableincomeOECDpapertobediscussedunderagendaitem29SeemsunlikelythatachangeinSNA93willberecommendedtotheISWGNAItemforcapitalgainstaxesaddedtoTable900DirecttaxesversustaxesonproductionandimportsSavingisnotaffectedbythemixofthesetaxesbuthouseholddisposableincomeisHowadjust?ReplacetaxesonproductionetcbyincometaxesReplaceincometaxesbytaxesonproductionetcUseastandardmixoftaxesforallcountriesSuggestthefirstofthesealternativesDeducttaxesonproductionetcfromHDIIssuesTaxesonproductionetcortaxesonproducts?Netofsubsidies?Directtaxesversustaxesonproductionandimports(cont)Issues(cont)Howmuchisattributabletoactualfinalconsumption?SomeoftheproductiontaxescouldbereplacedbyincometaxesoncorporationsratherthanallonhouseholdsDifficulttoestimatewhatpartoftaxesonproductionisattributabletoactualfinalconsumptionNoreasontoignoresubsidiesTherefore,proposeusingtaxesonproductslesssubsidiesonproductsasaroughapproximationTable5(adjustedratios)andTable6(differences)RealnetinterestpaymentsforhouseholdsAdjustmentfortheeffectofinflationoninterestratesandinterestflowsNeutralinterestRealinterest=Nominalinterest-neutralinterestOnlyincluderealinterestflowswhenderivinghouseholdsavingandHDI,thereforeneedtoDeductneutralinterestonassetsAddneutralinterestonliabilitiesAssetsusedforadjustmentshouldincludeassetsheldonhouseholdsbehalfbypensionfunds,lifeinsurancecorporationsandmutualfundsetcHouseholddurablesHouseholdsregardconsumerdurablesasassetsRentalequivalenceapproachcouldbeusedtoderivealternativeestimatesinsatelliteaccountsHowever,rentalmarketsforlongtermuseofconsumerdurablesmaynotbewelldevelopedTherefore,ifweassumenooperatingsurplusisgeneratedfromconsumerdurablesanapproximateadjustmentistosubtractexpenditureondurablesfrom,andaddconsumptionoffixedcapitalondurablesto,HFCEConsequently,householdsavingwouldbeincreasedbynetinvestmentinconsumerdurablesHouseholddurables(cont)OECDandEurostatarediscussingproposalsforadditionaldatacollectionregardinghouseholddurablesanddwellingsCOFCforhouseholddurables,Capitalstockfordwellingsandhouseholddurables,Capitalgains/lossesondwellingsRecommendation5:Countriesareencouragedtocompileseparateestimatesofhouseholdfinalconsumptionexpenditure,capitalstockandconsumptionoffixedcapitalforconsumerdurables.CapitalgainsandlossesHaveasignificantimpactonwealthandconsumptionofhouseholdsbutarenotincludedinhouseholdincomeinSNA93PotentialversusrealisedcapitalgainsDifferentimpactonconsumptionthanincomefromproductionortransfersImpactmaybedifferentforrealisedasopposedtopotentialcapitalgainsNominalorrealcapitalgains?Capitalgainsandlosses(cont)Recommendation6:Ratherthanadjustingthehouseholdsavingratioforcapitalgains/lossesdirectly,itisrecommendedthatcapitalgains/lossesbeusedasanadditionalexplanatoryvariablewhenanalysinghouseholdconsumptionbehaviour.PensionsDefinedbenefitschemesProblemofunderoroverfundingUnfundedpensionschemesActualpensionsdonotmatchaccruingliabilitiesfortheseschemesSocialsecurityversusprivatepensionschemesDifferentinstitutionalarrangementscontributetoobserveddifferencesinhouseholdsavingratiosPensionsRecommendation7:Itisrecommendedthatadjustmentsinrelationtosocialsecurityschemesshouldbeundertakenasaspecialexerciseandnotcombinedwithotheradjustmentstoderiveanalternativemeasureofthehouseholdsavingratio.ThepensionsEDGsponsoredbytheIMFprovidesanopportunitytoresolvetheproblemscausedbydefinedbenefitschemesandunfundedpensionschemesforpublicsectoremployeesinthecontextoftheforthcomingrevisionofSNA93.AnneHarrison’spaperonthepensionsEDGmakesavaluablecontributionconcerningthisissue.UnincorporatedenterprisesForwhichcountriesareunincorporatedenterprisesthataretreatedasquasi-corporatequantitativelysignificant?Dosuchcountriescompileestimatesforcompensationofemployeesforworkingproprietorsinquasi-corporationsoristhelabourreturntotheseworkingproprietorsincludedinoperatingsurplus?Dosuchcountrieshaveseparatedataonthelevelofwithdrawalsfromquasi-corporationsordotheysimplyassumethatalloftheentrepreneurialincomeofquasi-corporationsistransferredtohouseholdsinthecurrentperiod?FinancialaccountsmeasureChangeinfinancialposition(financialaccount)versusNetlending(capitalaccount)IfallofthedifferenceisassumedtobecausedbydeficienciesinincomeflowsthencanderivethefollowingalternativemeasureofthehouseholdsavingratioTable7givestheseratios,andTable8showsthedifferencebetweentheseratiosandthoseinTable2.Obviouslythedifferencescouldbecausedbydeficienciesinanyoftheitemsintheincome,capitalorfinancialaccountsAdditionalmeasuresforthehouseholdsavingratioAnalternativemeasureoraseriesofalternativemeasures?Docountrieshaveapreferenceforwhetheraseriesofsavingratiosshouldbecompiled,eachincludinganadjustmentforonefactororwhetherasinglealternativemeasureshouldbecompiledthatincludesadjustmentsforall(orasmanyaspossible)ofthevariousfactorssimultaneously?ProfitratiosCountrypracticesTypesofprofitratiosDefinitionsGrossornet?NumeratorDenominatorforratesofreturnDenominatorforprofitshareInstitutionalsectorscopeCountrypracticesProfitratiosarepresentedinmanydifferentwaysbymembercountriesUnitedKingdomGrossbalanceofprimaryincomesfornon-financialcorporationsasashareofgrossnationalincomeEconomicTrendsarticlecontainingdatafor34countriesfornetoperatingsurplusovernetcapitalstockplusinventoriesfornon-financialcorporationsUnitedStates8ratios;4rateofreturnmeasuresand4profitsharemeasuresRatiosrelatetoprivatenon-financialcorporationsCountrypractices(cont)UnitedStates(cont)Netoperatingsurplusandnetentrepreneurialincomeareusedbothbeforeandafterincometaxasthenumeratorforeachtypeofmeasure(Note:DifferentterminologyisusedbyBEA)NetcapitalstockplusinventoriesisusedasthedenominatorforrateofreturnmeasuresNetfactorincomelessNOSforpubliccorporationsisusedasthedenominatorforprofitsharemeasuresAustraliaGrossoperatingsurplusforfinancialandnon-financialcorporationsdividedbytotalfactorincomeFranceGOS/Grossvalueaddedatbasicpricesforallenterprises(corporateandquasi-corporateplusunincorporated)TypesofprofitratiosRatesofreturnProfitovercapitalstockUsedforprofitabilitystudiesProfitsharesProfitoverGDP,GNIortotalfactorincomeUsedforanalysesofreturnstolabourandcapitalProfitmarginProfitoveroutputNotrecommendedatthemacroeconomylevelDefinitionsforrateofreturnandprofitsharemeasuresGrossornetBothnumeratoranddenominatorshouldbenetofconsumptionoffixedcapitalUsegrossmeasureifconsumptionoffixedcapitalestimatesaredeficientNumerator(forbothratesofreturnandprofitshares)NetoperatingsurplusIndependentoftheextenttowhichborrowedfundsareusedEntrepreneurialincomeAfterreceiptsofpropertyincomeandpaymentsofinterestandrentonnon-producedassetsusedbythebusinessDefinitionsforrateofreturnandprofitsharemeasures(cont)DenominatorforrateofreturnmeasuresNetcapitalstockforproducedassetsIncludinginventories?Non-producedtangibleassets?Non-producedintangibleassets?DenominatorforprofitsharemeasuresNetdomesticproductNetfactorincomeWholeeconomyInstitutionalsectorusedfornumeratorInstitutionalsectorscopeNon-financialcorporationsFinancialcorporationsFinancialandnon-financialcorporationsCorporationsandunincorporatedenterprisesIdeallymixedincomeshouldbesplitintoareturntothelabourprovidedbyworkingproprietorsandareturntocapitalPrivateandpublicsub-sectorsforcorporationsRecommendationsregardingprofitratiosProfitmargintyperatiosusingoutput