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Roofs of Prague

Italian National Institute of Statistics National Accounts Department. The challenge of building human capital accounts starting from education satellite account. An exercise for Italy. Nadia Di Veroli Francesca Tartamella. STATISTICS “Investment in the Future 2” Prague, 14-15 September 2009.

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Roofs of Prague

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  1. Italian National Institute of Statistics National Accounts Department The challenge of building human capital accounts starting from education satellite account. An exercise for Italy Nadia Di Veroli Francesca Tartamella STATISTICS “Investment in the Future 2” Prague, 14-15 September 2009 Roofs of Prague

  2. Education and National Accounts Statistics - Investment in the future • Education is a key factor for growth and development. • In a NA context every measurement issue has to be coherent with SNAstandards and definitions • Boundaries of education • Agents involved • Economic flows • Representation of flows • Evaluation methods • A satellite account (SA) of education allows to arrange all economic flows regarding education integrated with the main accounts, guaranteeing coherence with all macroeconomics aggregates and indicators. Prague, 14 - 15 September 2009

  3. What are satellite accounts and which is the main purpose for compiling them? Statistics - Investment in the future • Satellite accounts are frameworks that organize information about the field in analysis in a different way with respect to the standard National Accounts in order to provide the most useful presentation. • They are designed to expand the analytical capacity of the National Accounts without overburdening them or interfering with their general purpose orientation. Prague, 14 - 15 September 2009

  4. The main advantages of compiling Satellite Accounts Statistics - Investment in the future • They are purpose oriented therefore they are suited to a particular analytical focus • They assure international comparability because definitions, classifications and accounting conventions must be consistent with international standards adopted by National Accounts • They are integrated with the main accounts therefore they are coherent with them • They display monetary and physical data therefore it became possible put in relation production to number of persons employed or stocks of equipment or to beneficiaries of service Prague, 14 - 15 September 2009

  5. Italian tradition in producing Satellite Accounts Statistics - Investment in the future • Yearly Social Protection Satellite Accounts since 1995 • National Accounts Matrix including Environmental Accounts (NAMEA), 1990 - 2003 • Environmental protection expenditure accounts, 1997 • Social Accounting Matrix, 1996 • Pilot studies for Non Profit Institutions Serving Households and tourism satellite accounts Prague, 14 - 15 September 2009

  6. Some preliminary remarks about Satellite Account of Education Statistics - Investment in the future • Up to now there is no conceptual framework officially and internationally defined • The designing of a framework that reflects reality for one country may not necessary be appropriate for others countries • Definition of the boundaries of education sector depends upon the purpose of analysis • The SAE aims to put together all financial flows regarding education in a set of coherent accounts in order to evaluate the education costs for the community, to study its financing and to determine the costs of different education levels and different activities Prague, 14 - 15 September 2009

  7. The proposed framework of Satellite Account of Education Statistics - Investment in the future • The education field has been analyzed from the perspective of producers and financers • Step 1- Identification of: • Boundary of education sector • Producing agents • Financing agents • Products/services provided Prague, 14 - 15 September 2009

  8. The proposed framework of Satellite Account of Education Statistics - Investment in the future • Step 2 - Planning a set of 4 tables answering the following questions: • Table I: Who is financing? Who is producing? (by institutional sector) • Table II: Who is financing? Who is producing? (by economic activity) • Table III: What are the main uses of education products? • Table IV: What kind of labour is involved in the production process? Prague, 14 - 15 September 2009

  9. Institutions producing education Table I General Private Central Non financial Government producers Total Government corporations NPISHs S13 S11+S15 producers S1311 ……… S11 S15 RESOURCES Current transfers/contributions from financing agents (AF) Income from sales Capital transfers from financing agents Other incomes USES Output of non market sector Intermediate consumption Consumption of fixed capital Taxes on production Compensation of employees net operating surplus (market activities) Output of market sector Taxes on income etc Current transfer to other sectors and sub-sectors Other expenditures Gross fixed capital formation Balancing item Statistics - Investment in the future Who is financing? Who is producing? (by institutional sector) Prague, 14 - 15 September 2009

  10. Producers by main economic activity Table II TOTAL PRODUCERS General Government producers Private producers RESOURCES Current transfers/contributions from financing agents Income from sales Capital transfers from financing agents Other incomes USES Output of non market sector Intermediate consumption Consumption of fixed capital Taxes on production Compensation of employees net operating surplus (market activity) Output of market sector Taxes on income etc Current transfer to other sectors and subsectors Other expenditures Gross fixed capital formation Balancing item Statistics - Investment in the future Who is financing? Who is producing? (by economic activity) Prague, 14 - 15 September 2009

  11. Products Table III ep1 ep2 … ep4 SUPPLY Output at basic prices (producers of education) Taxes less subsidies on products Imports of education products Total supply of education products at purchasers' prices USE Intermediate consumption Final consumption Households (S16) Government (S13) individual collective Exports of education products Capital formation Total use of education products at purchasers' prices Statistics - Investment in the future What are the main uses of education products? Prague, 14 - 15 September 2009

  12. Producers by main economic activity Table IV TOTAL PRODUCERS General Government producers Private producers Employees Teachers Other employees Self employed Teachers Other self-employed Statistics - Investment in the future What kind of labour is involved in the production process? Prague, 14 - 15 September 2009

  13. Implementation of the proposed framework Statistics - Investment in the future • The tables require to provide figures with an high level of details both for the financing agents and for the producers of the service itself • National Account provides main economic aggregates such as current and capital transfers, output, intermediate consumption, consumption of fixed capital, compensation of employees by institutional sector and economic activity Prague, 14 - 15 September 2009

  14. Education and human capital Statistics - Investment in the future • Education can be considered as human capital formation, therefore the evaluation of the inputs and the outputs of education, is the first step towards a comprehensive human capital account • Human capital: productive capacity embodied in individuals (knowledge, know-how, skills, experiences and abilities) that people gain and offer on the market in exchange for compensation. • Human capital theory focuses on the relationship between education and wages, since formal education is considered the main input in the human capital formation Prague, 14 - 15 September 2009

  15. Education and human capital Statistics - Investment in the future • Compiling SAE is the first step towards estimating the human capital account. • A comprehensive account of human capital, even when limited to formal education, would need to integrate an evaluation of the input and the output of the education process. Prague, 14 - 15 September 2009

  16. Output of education Statistics - Investment in the future • The output of education is educated individuals who are more productive and thus earn higher incomes and also contribute to society in other less tangible ways. • The output cannot be measured easily. Counting numbers of students enrolled is not the same as measuring the amount of education received. • The value of educational output can be set equal to the cost of inputs, but if output is measured independently its value may not balance the value of inputs. • Discrepancies may reflect the failure to measure all relevant inputs or resources allocation failures. Prague, 14 - 15 September 2009

  17. Income based approach (Jorgenson-Fraumeni, 1989) Statistics - Investment in the future • The “income-based approach”, based on the sum of stream of discounted lifetime expected incomes, is used to measure educational output. • The method proceeds in the following steps: • Construct a database including the economic value of market labour activities and demographic variables for adult individuals • Model the time paths of the income stream by assuming that an individual with a certain age/educational attainment will base his/her expectation of earnings next year on the current observed earnings of people one year older (but with same gender-education level) • Apply per capita values to all individuals and compute the total discounted future income stream to obtain the aggregate value of HC stock Prague, 14 - 15 September 2009

  18. Future developments in the research agenda • Facing the problems connected with measurement of flows: • Defining the boundaries of education sector and choosing the set of products to be considered typical and those connected to education services • Analysing of existing data sources in order to build the set of indicators used for the break down of flows • Providing an overview of the beneficiaries of education services • Examining distribution of individual and households according to: size of income, age, gender, etc. • Implementing the income approach method • Building the described database, in the context of an OECD project to compute comparable estimation of HC based on shared definitions and methodology Prague, 14 - 15 September 2009

  19. Classification of economic activity of producers (Nace Rev 1.1) Statistics - Investment in the future 80.1 Primary education 80.10 Primary education 80.2 Secondary education 80.21 General secondary education 80.22 Technical and vocational secondary education 80.3 Higher education 80.4 Adult and other education 80.41 Driving school activities 80.42 Adult and other education n.e.c. Table IV Table II Prague, 14 - 15 September 2009

  20. Classification of agents by Institutional sector and sub sector Statistics - Investment in the future Table I Table II Table III Prague, 14 - 15 September 2009

  21. Classification of products (CPA and ISCED) Statistics - Investment in the future EP1Pre-primary and primary education EP2Secondary education EP3Post-secondary and tertiary education EP4Other products: Ancillary products and services (books, transports, canteens…) Table III Table I Table II Prague, 14 - 15 September 2009

  22. Income based approach Statistics - Investment in the future • The data base has to include all the relevant information required for the estimates: • population • employment rates (on employees and self employed) • unemployment rates • school enrolment rates • annual labour compensations • All variables should be cross-classified by: • Gender • Age or age groups • Education levels. Prague, 14 - 15 September 2009

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