The Measurement of Nonmarket Sector Outputs and Inputs Using Cost Weights

Walter Diewert

Economics working papers from Vancouver School of Economics

Abstract: In many sectors of the economy, governments either provide various services at no cost or at highly subsidized prices. Examples are the health, education and general government sectors. The System of National Accounts 1993 recommends valuing these nonmarket outputs at their costs of production but it does not give much guidance on exactly how to do this. In this paper, an explicit methodology is developed that enables one to construct these marginal cost prices. However, in the main text, an activity analysis approach is taken in order to simplify the analysis, so in particular, constant returns to scale, no substitution production functions for the specific activities in the nonmarket sector are assumed. It is shown that it is possible to obtain meaningful measures of Total Factor Productivity growth in this framework. An Appendix relaxes some of the restrictive assumptions that are used in the main text.

Keywords: Measurement of output; input and productivity; nonmarket sector; health; education; general government; cost functions; duality theory; marginal cost (search for similar items in EconPapers)
JEL-codes: C43 D24 D57 E23 H40 H51 H52 I10 I20 O47 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2008-01-18, Revised 2008-11-13
New Economics Papers: this item is included in nep-eff
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:ubc:bricol:diewert-08-01-18-09-21-07

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