1 October 10-12, 2006 Working Party on National Accounts Alain GALLAIS Towards a better measure of...

October 10-12, 2006 Working Party on National Accounts

Alain GALLAIS

1

Towards a better measure ofnon market output

The OECD non market project

Report of the joint OECD/UK/Norway seminar

(London, October, 3-5, 2006)


Alain GALLAIS

2

The context : SNA 93

16.134. « In principle, volume indices may always be compiled directly by calculating a weighted average of the quantity relatives for the various goods or services produced as outputs using the values of these goods and services as weights. Exactly the same method may be applied even when the output values have been estimated on the basis of their costs of production. »

16.138. « There is no mystique about non-market health or education services which make changes in their volume more difficult to measure than volume changes for other types of output, such as financial or business services or fixed tangible assets. Moreover, changes in their volume are also needed in order to be able to measure volume changes for the actual consumption of households. The same principles apply to the measurement of consumption as to production. »


Alain GALLAIS

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The context : the European handbook

Education « the quantity of teaching received by the students, adjusted to allow for the qualities of the services provided, for each type of education »

« the transfer of knowledge, successfully or not »

Health « quantity of health care received by patients, adjusted to allow for the qualities of service provided, for each type of health care. »

« The quantity of health care received by patients should be measured in terms of complete treatments ».

pupil-hours or number of pupils

class size, school inspections, scores ?by ISCED-97

number of treatments, or consultations, or first visits

by providers, then by functional care, then by DRGs

?


Alain GALLAIS

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The context : the Atkinson review

Principle A : “the measurement of government non-market output should, as far as possible, follow a procedure parallel to that adopted in the national accounts for market output.”

Principle B : “the output of the government sector should in principle be measured in a way that is adjusted for quality, taking account of the attributable incremental contribution of the service to the outcome.”

Principle C : “Account should be taken of the complementarity between public and private output, allowing for the increased real value of public services in an economy with rising real GDP”.

6 other principles (H on triangulation…) Note : the UK had already output methods, but sub-optimal ?

good practice for quality adjustment


Alain GALLAIS

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The context : a transatlantic gap ?

European countries : by commission decision 2002/990/EC, almost all countries will apply output methods in education and health according to the European handbook recommendations, in 2006 or following years.

Australia and New Zealand have applied also output methods for years.

North America (US, Canada) still apply input methods Output methods often < Input methods There could be a “transatlantic gap” of 0.25% of GDP

growth / year. OECD role is to promote international comparability.


Alain GALLAIS

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The OECD non market project

This project, focussed on education and health especially, both in temporal and spatial dimensions, was presented by OECD at the 2005 meeting of the Committee on Statistics.

INSEE has assigned Alain GALLAIS to coordinate this project in OECD, for 18 months (April 2006 -> September 2007).

workshop in London, 3-5 October 2006, co-hosted by ONS and the government of Norway. Attendance of more than 160 experts of National Accounts, PPP, education, health and public services efficiency fields.


Alain GALLAIS

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Objective : OECD handbook on best practices

OECD non-EU countries Questionnaire OECD June 2006 AU, NZ wo quality adjustments,

projects in the US ?

=> Promotion of output methods

The originality of the OECD non-market project : develop a synergy between experts in NA, PPP, education, health and public services efficiency fields (several networks).

EU countries Questionnaire Eurostat June 2006 Almost all countries in the process, but

few with quality adjustment

=> Promotion of best quality adjustments

Review of best practices in output methods, more detailed international guidelines for temporal analysis

Frameworks and formulas for output methods in PPP limited to education and health


Alain GALLAIS

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The London seminar : the UK experience

Of course, the UK was not chosen « by hazard » to host the workshop : the ATKINSON review and then the creation of the UKCeMGA inside the ONS have provided a good experience, still in progress (public order and safety, social services).

Importance of the communication strategy. Key stakeholders.

Need for more timely, detailed and better quality data on government expenditure.

A lot of proposals by DfES (education) and DH (health). Not always easy for the NA unit.


Alain GALLAIS

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The London seminar : nordic experiences

Norwegian StatRes project : transparency and benchmarking. Mapping the current information jungle (input, activity, output, outcome) :– KOSTRA for municipalities– SAMDATA for health statistics– Skoleporten for education– Each sector / agency has its own specific website

Swedish NA : all individual services, including social services and culture.

Finnish project for NA : each public entity is asked on its shares of turnover / costs and on its outcomes / quantity indicators. No quality adjustment. Example


Alain GALLAIS

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The London seminar : US projects

There is no agenda for moving to output methods. But there are 3 parallel projects on alternative

methods for education :– Barbara FRAUMENI et al., relying on human capital theory;– Michael CHRISTIAN et al., more classic output method;– Use of market prices.

In health, research is still "in its nascent stage“. A paper of Michael CHRISTIAN has explored several possibilities, mainly relying on DRGs, leading to “counter intuitive” results (output < < input).


Alain GALLAIS

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The London seminar : terminology aspects

In the view of policy makers :

o rg a n isa tion o r p ro g ra mme

fin a lo u tco me s

in te rme d ia teo u tco me s

a ctiv itie sin pu ts o u tpu tso b je ctive s

so cio e co n omicp ro b lems

n ee d s

releva nce

effi ciency

uti l i ty a nd susta ina bi l i ty

econom y

e n viro n m e n t

cost effecti veness

effectiveness

1

7

6543

2

12

11

10

9

8

16

15

14

13

Source : Wouter Van DoorenActivities = quantities ?


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The London seminar : terminology aspects

In the view of health economists : « The term of outcomes refers to a multi-dimensional

concept of (positively or negatively expressed) characteristics of output, such as health changes, “responsiveness” of services to peoples non-health expectations (e.g., no waiting time, other convenience of access, quality of facilities, and amenities in hospitals or nursing homes). There are several possibilities for valuation of changes in health states measured, such as Quality Adjusted Life Years (QALYs). »

No ! (quality adjustment)

Source : Manfred HUBER


Alain GALLAIS

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The London seminar : scares and hopes about output methods

National Accountants Before, with hypothesis of null

productivity, countries were comparable.

Now, with diversity on quality adjustment, countries could not be comparable any longer.

Data on productivity will be scrutinized by politicians

But new productivity is often negative !

Output is not outcome

Policy makers Before, output in NA was of no

interest. Interest of harmonization. Now, NA could capture all

outcomes useful for policy makers, with an official and consistent label, according to the vocation of NA.

Interest of explanations. NA can only be one-

dimensional


Alain GALLAIS

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The London seminar : differencesbetween output and outcome (1)

Influence of consumers’ characteristicsThe outcome can be influenced by consumers’ characteristics (level of knowledge of pupils, health status of patients before they are provided any service). Should the output be as close as possible of outcome, or should it neutralize consumers’ characteristics to rely only on providers’ ?

ExternalitiesIn general, National accounts do not record externalities (pollution…). But some expected outcomes of an activity can concern other ones (road safety for health or health status for market economy). Should the output of public services record the externalities on other activities ?


Alain GALLAIS

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The London seminar : differencesbetween output and outcome (2)

InequalitiesSome policies in individual non market services focus on reduction of inequalities (of knowledge and skills in education…). Market activities do never take them into account (total F C = single addition of individual F C, total income…). Should NA make an exception for non market services ? Including individual services ?

Coverage of policy makers’ purposesMust all the dimensions of outcomes be reflected in the one-dimensional output ?


Alain GALLAIS

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The London seminar : education

The European handbook suggests several possibilities for quality adjustments :

Pupil-hours (if possible adjusted for occasional absence of pupils) are a better « quantity » indicator than number of pupils;

The class-size or pupil/teacher ratio after a sound analysis on its effect on the quality of teaching ;

School inspections ; Examination data.

But are all these quality adjustments consistent with each other ?


Alain GALLAIS

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The London seminar : education for PPP (not yet validated)

Output in NA

(my point of view)

OECD Education unit statistics

Outcome for policy makers

(ex of FR point of view)

PISA national scores corrected on ESCS+ time-lag

PISA national average scores

Level of knowledge

Out of purpose of NA PISA national SD Reduction of inequalities

Externality ?

Out of purpose of NA

Citizenship

Quality adjustment for upper second. vocational

Rates of employment

Insertion in Labour market

Translation of the same formula in spatial dimension :


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Education : draft framework for PPP (M + NM)

Recommendations of the handbook

Finest detail of cycles

Act. F.C.

Num. pupils

Quality index

Pre-school - ISCED 0 Pre-school none

Primary school – ISCED 1

Primary school PISA /

PIRLS + TIMSS ?Special primary

Lower secondary – ISCED 2

Secondary 1st stage PISASpecial secondary PISA

Upper secondary

- ISCED 3

general, pre-voc. PISAvocational PISA + employ. rate ?

Post-sec. non tert.

- ISCED 4

Post-secondary non tertiary

PISA

Higher education

- ISCED 5 and 6

Long superior ISCED 5A

Number of degrees

and duration of studies.

Short technical superior-ISCED 5B

Advanced research qualification – ISCED 6

Other education


Alain GALLAIS

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The London seminar : proposals of DH for health output (UK)

“Two treatments might have the same costs, but one might result in a major increase in health outcomes (longer life, or better quality life) while the other might have much smaller health gain. The aggregate measure of healthcare output should reflect the number of treatments with major health gain, rather than just taking account of current costs.”

Use of value weights (QALY) instead of cost weights. Use of mortality rates and waiting times. Use of « value weight » for statins : prevention better than

curative care. Patient experience. None of these has been into account in British NA yet.

Some proposals can be exclusive of each other.


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New : Paris Health accounts meeting,6th of October, 2006

« Cost of illness » has been compared among a dozen of European countries, and Eurostat find the results homogeneous and plausible.

« Cost of illness » is recommended for international comparisons, should be integrated in SHA, which would harmonize some conventions (fixed costs, prevention, collective purposes…)

NL wants to calculate volume and price with this framework (no methodology yet).

But few data on QALY (main idea for quality adjustment).


Alain GALLAIS

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Possible content of the final« OECD best practices manual »

Synthesis of national experiences and results Definitions, principles and terminology (input / output / outcome) Then by activities (education, health, public order and safety ?)

Definitions, principles, terminology Review of (best) stratification and quantity indicators Review of best quality indicators Temporal formulas Spatial framework and formulas Verification of consistency between market and non-market methods

For September 2007


Alain GALLAIS

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Next steps

2 meetings in 2007 for the Eurostat-OECD NA-PPP task force on Non Market Services

? Meetings in 2007 for the (planned) upcoming OECD task force on Health specific PPP

Permanently in contact with countries to study their practices and projects

Submission of proposals to Health and Education OECD networks

Workshop in Paris, 7-8 June 2007, on the model of the London workshop.

Presentation of draft handbook to the October 2007 WPNA

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