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
Statistics - Investment in
the future
Education and National Accounts
Education is a key factor for growth and development.
In a NA context every measurement issue has to be
coherent with SNA standards and definitions
1.Boundaries of education
2.Agents involved
3.Economic flows
4.Representation of flows
5.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.
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Statistics - Investment in
the future
What are satellite accounts and which is the main
purpose for compiling them?
•
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.
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Statistics - Investment in
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The main advantages of compiling Satellite Accounts
• 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
Statistics - Investment in
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Italian tradition in producing Satellite Accounts
• 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
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Some preliminary remarks about Satellite Account of
Education
• 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
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The proposed framework of Satellite Account of
Education
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
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The proposed framework of Satellite Account of
Education
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?
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Institutions producing education
Table I
General
Private Non financial
Central
Government Government
producers corporations NPISHs
Total
producers S13
S1311
……… S11+S15 S11
S15
Who is financing?
Who is producing?
(by institutional
sector)
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
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Who is financing? Who is producing? (by economic activity)
Producers by main economic activity
Table II
TOTAL 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
subsectors
Other expenditures
Gross fixed capital formation
Balancing item
and
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General Government producers
Private producers
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What are the main uses of education products?
Products
Table III
ep1
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
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ep2
…
ep4
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What kind of labour is involved in the production process?
Producers by main economic activity
Table IV
TOTAL PRODUCERS
Employees
Teachers
Other employees
Self employed
Teachers
Other self-employed
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General Government producers
Private producers
Statistics - Investment in
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Implementation of the proposed framework
•
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
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Education and human capital
•
•
•
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
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Statistics - Investment in
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Education and human capital
•
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.
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Output of education
•
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.
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Income based approach (Jorgenson-Fraumeni, 1989)
•
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:
1. Construct a database including the economic value of market
labour activities and demographic variables for adult individuals
2. 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)
3. Apply per capita values to all individuals and compute the total
discounted future income stream to obtain the aggregate value
of HC stock
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Future developments in the research agenda
1. 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
2. Providing an overview of the beneficiaries of
education services

Examining distribution of individual and households according
to: size of income, age, gender, etc.
3. 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
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Classification of economic activity of producers (Nace
Rev 1.1)
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 II
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Table IV
Statistics - Investment in
the future
Table I
Table II
Table III
Classification of agents by Institutional sector and sub
sector
AF1
AF1.1
AF1.1.1
AF1.1.2
AF1.2
AF1.2.1
AF1.2.2
AF1.2.3
AF1.2.4
AF1.2.5
AF2
AF2.1
AF2.2
AF2.3
AF2.4
AF3
AP1
AP1.1
AP1.1.1
AP1.2
AP1.2.1
AP1.2.2
AP1.2.3
AP1.2.4
AP1.2.5
AP2
AP2.1
AP2.2
AP2.3
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General Government institutions (S.13)
Central Government (S.1311)
State
Others
Local Government (S.1313)
Regions
Provinces
Municipalities
Universities
Others
Private institutions
Non financial corporations (S.11)
Financial corporations (S.12)
Producer households (S.16)
Non profit istitutions serving households (NPISH) (S.15)
Households (S.14)
Rest of the world (S.2)
Statistics - Investment in
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Classification of products (CPA and ISCED)
EP1 Pre-primary and primary education
EP2 Secondary education
EP3 Post-secondary and tertiary education
EP4 Other products: Ancillary products and services
(books, transports, canteens…)
Table I
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Table II
Table III
Statistics - Investment in
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Income based approach
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