Areas for improvement

View the most recent version.

While the Canadian Productivity Accounts has one of the better System of National Accounts programs in the world on which to build, there are several areas where improvements can be made.

First, estimates of growth in real output require estimates of price deflators. All statistical systems evolve by adjusting to user demand. The System of National Accounts is generally superior when it comes to producing estimates of output in current dollars than they are for producing estimates of volume growth because the latter require price indices for a very broad range of a constantly changing bundle of products. The System of National Accounts estimates almost 30% of output in the business (market) sector in ways that merit improvement.¹³

The System of National Accounts has progressed considerably in this area and continues to make progress within constrained budgets. In particular, the Services Price Initiative has begun to produce new more accurate measures of prices in areas where it had no estimates (and where input prices were used as proxies) and in those areas where changes in the economy (deregulation of airline and communications industries) were producing price changes that required new collection procedures.

The problems of measuring growth in real output are particularly severe when it comes to measuring real output in the government and non-market sector. Generally, where market transactions are not available to measure revenues, output is measured by payments to factors in the non-market sector. Input prices are used to deflate this measure—which yields, by construction, zero productivity growth. Because of this, the Productivity Accounts focus most of their attention on only the market or business sector—despite the demand from the user community for more comprehensive estimates.¹⁴

Second, users of productivity growth estimates need to take into account potential problems with the concepts used by the international system of national accounts to measure output of particular sectors. Deficiencies in both the banking and insurance sectors have received considerable

attention from the user community.¹⁵ Other industries that have received attention are the resources sector and the measurement of real output associated with exploration activity in natural resource industries. The latter is particularly important to the resource sector of the Canadian economy.

Third, consideration needs to be given to whether the list of inputs used in the estimate of multifactor productivity (MFP) is sufficiently comprehensive. For example, the estimates of capital focus primarily on physical capital—machinery and equipment, buildings, and engineering structures. Recent work in the academic community has suggested that intangible assets (one of which is research and development) have become increasingly important and need to be considered if we are to better understand the growth process. Similarly, estimates of MFP in the business sector generally ignore the impact of public infrastructure.

 

13. This includes the finance sector and industries where implicit prices using inputs (i.e., labour) have been employed.

>14. Estimates of total economy are produced in occasional publications as a result of special user requests—often for international comparisons when comparable estimates of the business sector are not readily available for other countries.

15. See Triplet and Bosworth 2004.