National Income And Product Accounts Research Articles

Output measurement and technological shocks in business cycles

ABSTRACT Is the importance of technology shocks in accounting for the fluctuations in output and hours sensitive to the measure of output? Using a vector autoregression, we empirically investigate the contribution of technological shocks to economic fluctuations when output is defined in consumption units, as commonly used in many macroeconomic models, and when output is tabulated according to the Divisia index in the U.S. National Income and Product Accounts (NIPAs). Based on a standard neoclassical growth framework that allows for a mapping of theory into any desired measure of output, we establish that the same restrictions may be used to identify technology shocks in a vector autoregression model regardless of the measure of output. However, our estimation reveals that while the combination of both investment-specific technology shocks and neutral technology shocks accounts for a large portion of the business cycle variability of hours and output, the choice of the measure of output via the use of the associated deflator greatly affects the amplification of the shocks in the responses and the variability of the responses in output and hours.

Smoking and healthcare expenditure reductions associated with the California Tobacco Control Program, 1989 to 2019: A predictive validation.

Previous research used data through 2008 to estimate a model for the effect of the California Tobacco Control Program (CTCP) that used cumulative real per capita tobacco control expenditure to predict smoking behavior (current adult smoking prevalence and mean cigarette consumption per current smoker). Predicted changes in smoking behavior due to the CTCP were used to predict its effect on health care expenditure. This research updates the model using the most recently available data and estimates CTCP program effect through 2019. The data used in the previous research were updated, and the original model specification and a related predictive forecast model were re-estimated. The updated regression estimates were compared to those previously published and used to update estimates of CTCP program effect in 2019 dollars. There was no evidence of structural change in the previously estimated model. The estimated effect of the CTCP program expenditures on adult current smoking prevalence and mean consumption per adult current smoker has remained stable over time. Over the life of the program, one additional dollar per capita of program expenditure was associated with a reduction of current adult smoking prevalence by about 0.05 percentage point and mean annual consumption per adult current smoker by about 2 packs. Using updated estimates, the program prevented 9.45 (SE 1.04) million person-years of smoking and cumulative consumption of 15.7 (SE 3.04) billion packs of cigarettes from 1989 to 2019. The program produced cumulative savings in real healthcare expenditure of $544 (SE $82) billion using the National Income and Product Accounts (NIPA), and $816 (SE $121) billion using the Center for Medicare and Medicaid Services (CMS) measure of medical costs. During this time, the CTCP expenditure was $3.5 billion. A simple predictive model of the effectiveness of the CTCP program remained stable and retains its predictive performance out-of-sample. The updated estimates of program effect suggest that CTCP program has retained its effectiveness over its 31-year life and produced a return on investment of 231 to 1 in direct CMS medical expenditure.

Assessing the State of the U.S. Nonprofit Sector: What Indicators Should We Use?

This research note identifies seven key dimensions of the nonprofit sector that nonprofit stakeholders want to monitor to assess the sector’s condition, including financial resources; human resources; the diversity of nonprofit boards, staff, and clients; the impact of the nonprofit sector; advocacy activity; ethical and legal behavior; and the existence of a supportive environment. The article then describes current measures of these dimensions, noting the shortcomings of many of these measures. Two government data sources, the National Income and Product Accounts (NIPAs) and the Current Population Survey (CPS), are highlighted that contain timely information about the nonprofit sector but which, to date, have been underutilized by sector stakeholders. Next, the article describes the picture of the nonprofit sector that emerges from the relevant measures before concluding with discussion of further work needed to improve measurement of the sector.

Institutionalism in Action: Balancing the Substantive Imbalances of “the Economy” through the Veil of Money

Scholars working on the history of economics and economic governance assume national income accounting emerged naturally out of Keynesian concerns with economic growth and wartime needs. This paper provides an alternative and more complex genealogy, arguing instead that income accounting was born out of a governmental project, implemented by institutionalist economists at the National Bureau of Economic Research (NBER) during the interwar period, to manage “the business cycle.” Bridging the literatures on the history of economic policymaking of the interwar period and the postwar triumph of “American Keynesianism,” it shows that institutionalists developed income accounting as a knowledge infrastructure to monitor inter-sectoral imbalances that generated cyclical fluctuations. Called the National Income and Product Accounts (NIPA) System, this infrastructure constructed “the economy” as a composite statistical object, composed of many disparate, nonfungible substantive elements that could not have been otherwise patched into a coherent whole. Wrapping these elements into the veil of money, the NIPA System became the interface through which policymakers intervened in intersectoral imbalances at the level of monetary flows with fiscal tools.

Finance and Intangibles in American Economic Growth: Eating the Family Cow

The American economy changed rapidly since the World Wars as producers expanded new products and services in communication, computers and transportation. We kept track of this transformation through the National Income and Product Accounts (NIPA), a set of statistical constructs designed before these changes started. The national accounts stretched to accommodate these new and growing activities, but efforts to fit them into our measurement of national product and of economic growth have not yet borne fruit. I argue in this paper that our current economic data fail to describe accurately the path of growth in our new economy. They fail to reveal that the United States is consuming its capital stock now and will suffer later, rather like killing the family cow to have a steak dinner.

The historical evolution of the cost of social reproduction in the United States, 1959–2012

ABSTRACT Using data from the US Bureau of Economic Analysis (BEA) National Income and Product Accounts (NIPA) – including a BEA satellite account that imputes monetary values for unwaged household production – this paper provides a feminist, class-based framework for estimating the annual cost of social reproduction in the United States from 1959 to 2012. The key finding is that for US working-class households, the cost of socially reproducing labor-power has risen relative to the cost of employing labor-power, implying that employers are paying for a decreasing proportion of the total societal cost of socially reproducing labor-power. These results are discussed in relationship to growing income inequality and the contradictory role of the state in the US neoliberal era.

Asset Pricing With Data Revisions

This paper documents the asset pricing implications of the data release process of National Income and Product Accounts (NIPA) consumption expenditure. We show that initial consumption data releases are more suitable for asset pricing than final revised releases. This is because most revisions smooth out important short-term consumption growth fluctuations. This also explains the documented success of non-revised proposals like garbage and electricity and unfiltered consumption which recover these lost short-term fluctuations. Yet, first revisions specifically incorporate novel information and their magnitude is strongly linked to uncertainty about consumption growth. On this basis, we formulate a new consumption-based model, the Revised CCAPM, which incorporates these effects from the release process using only NIPA vintage data. It explains a striking 75% of the cross-sectional variation in average returns on the 25 size-value portfolios, including a large part of the value premium, when featuring the first data release and state-dependent uncertainty coming from first revisions. These effects are consistent with investors' state-dependent ambiguity attitudes and are priced in the financial market as such.

Forecasting GDP growth with NIPA aggregates: In search of core GDP

In addition to GDP, which is measured using expenditure data, the U.S. national income and product accounts (NIPAs) provide a variety of measures of economic activity, including gross domestic income and other aggregates that exclude one or more of the components that make up GDP. Similarly to the way in which economists have attempted to use core inflation—which excludes volatile energy and food prices—to predict headline inflation, the omission of GDP components may be useful in extracting a signal as to where GDP is going. We investigate the extent to which these NIPA aggregates constitute “core GDP.” In an out-of-sample forecasting exercise using a novel real-time dataset of NIPA aggregates, we find that consumption growth and the growth of GDP excluding inventories and trade have historically outperformed a canonical univariate benchmark for forecasting GDP growth, suggesting that these are promising measures of core GDP growth.

The Accumulation of Human and Nonhuman Capital, Revisited

In the over 25 years since Jorgenson and Fraumeni (1989) published their first article integrating human capital measures with the national accounts, the Bureau of Economic Analysis's (BEA's) U.S. National Income and Product Accounts (NIPAs) and U.S demographics have changed significantly. The original paper is a national income accounting paper with production and factor outlay, income, receipt and expenditure, capital accumulation, and wealth accounts in current and constant prices. In this paper, we update the Jorgenson‐Fraumeni human capital estimates and integrate them into the latest NIPA accounts. A comparison of the aggregates for the U.S. and their trends between the earlier 1949–19 period and later 1998–2009 period is informative. The benefit from integrating human capital components into BEA's NIPA over a long historical time period allows us to quantify the impact of the end to the gains in average educational attainment, changes in female labor force participation, and the possible impact of the greying of America.

Own-Account IT Equipment Investment

This note considers a puzzle: why has information technology (IT) equipment investment in the National income and Product Accounts (NIPAs) been so weak since 2007 at the same time that financial reports indicate massive increases in capital expenditures by IT service companies?

Forecasting GDP Growth with NIPA Aggregates

Beyond GDP, which is measured using expenditure data, the U.S. national income and product accounts (NIPAs) provide an income-based measure of the economy (gross domestic income, or GDI), a measure that averages GDP and GDI, and various aggregates that include combinations of GDP components. This paper compiles real-time data on a variety of NIPA aggregates and uses these in simple time-series models to construct out-of-sample forecasts for GDP growth. Over short forecast horizons, NIPA aggregates—particularly consumption and GDP less inventories and trade—together with these simple time-series models have historically generated more accurate forecasts than a canonical AR(2) benchmark. This has been especially true during recessions, although we document modest gains during expansions as well.

Asset Pricing without Garbage

ABSTRACTThis paper provides an explanation for why garbage implies a much lower relative risk aversion in the consumption‐based asset pricing model than National Income and Product Accounts (NIPA) consumption expenditure: Unlike garbage, NIPA consumption is filtered to mitigate measurement error. I apply a simple model of the filtering process that allows one to undo the filtering inherent in NIPA consumption. “Unfiltered NIPA consumption” well explains the equity premium and is priced in the cross‐section of stock returns. I discuss the likely properties of true consumption (i.e., without measurement error and filtering) and quantify implications for habit and long‐run risk models.

In Search of Accounting Conservatism at the Macroeconomic Level

We revisit evidence that conditional conservatism aggregates up from the firm level causing corporate profit estimates in the National Income and Product Accounts (NIPA) to be more sensitive to negative relative to positive aggregate return news. Our study delivers three main messages. First, annual estimates of NIPA corporate profits are designed to provide neutral estimates of income from current production regardless of whether times are good or bad. Second, we find spurious evidence of asymmetric sensitivity to aggregate return news in placebo test variables that are void of conditional conservatism, clearly indicating that an alternative explanation is in order. Third, we find that the variance of aggregate returns decreases with the level of economic activity. Although this return variance effect is unlikely to be attributed to accounting, it has the potential to generate spurious evidence of conditional conservatism at the macro level. Overall, our study highlights the importance of construct validity tests in archival studies and contributes to research in the properties of NIPA corporate profits.

From Micro to Macro: Does Conditional Conservatism Aggregate Up in the National Income and Product Accounts?

ABSTRACTWe revisit evidence that conditional conservatism aggregates up from the firm level causing corporate profit estimates in the National Income and Product Accounts (NIPA) to be more sensitive to negative relative to positive aggregate return news. Our study delivers three main messages. First, annual estimates of NIPA corporate profits are designed to provide neutral estimates of income from current production regardless of whether times are good or bad. Second, we find spurious evidence of asymmetric sensitivity to aggregate return news in placebo test variables that are void of conditional conservatism, clearly indicating that an alternative explanation is in order. Third, we find that the variance of aggregate returns decreases with the level of economic activity. Although this return variance effect is unlikely to be attributed to accounting, it has the potential to generate spurious evidence of conditional conservatism at the macro level. Overall, our study highlights the importance of construct validity tests in archival studies and contributes to research in the properties of NIPA corporate profits.JEL Classifications: M41; G12; E43; E52.Data Availability: Data are available from the sources identified in the text.

Internet Appendix: Asset Pricing without Garbage

This paper provides an explanation for why garbage implies a much lower relative risk aversion in the consumption-based asset pricing model than National Income and Product Accounts (NIPA) consumption expenditure: unlike garbage, NIPA consumption is filtered to mitigate measurement error. I apply a simple model of the filtering process that allows one to undo the filtering inherent in NIPA consumption. “Unfiltered NIPA consumption” well explains the equity premium and is priced in the cross-section of stock returns. I discuss the likely properties of true consumption (i.e., without measurement error and filtering) and quantify implications for habit and long-run risk models.The paper "Asset Pricing without Garbage" to which these Appendices apply is available at the following URL: http://ssrn.com/abstract=2327055.

A Microsimulation Model of the Distributional Impacts of Climate Policies

Carbon policies introduce potentially uneven cost burdens. Anticipating these outcomes is important for policymakers seeking to achieve an equitable outcome and can be politically important as well. This paper describes the details of a microsimulation model that utilizes the price and quantity changes predicted by economic models of carbon policies to make an estimation of economic incidence by income quintile or state, and potentially across other dimensions. After taking as inputs the aggregate output from partial or general equilibrium economic modeling, the microsimulation model uses data from the Consumer Expenditure Survey (CE), the State Energy Data System (SEDS), the National Income and Product Accounts (NIPA), estimations from the Congressional Budget Office (CBO), and the Haiku electricty model. These data sources are used to estimate the share of consumer and producer surplus changes that accrue to households in each income quintile and state. The model is unique among existing incidence models in its ability to drill down to the level of state incidence and to plug into a wide range of economic models.

Do Retired Americans Annuitize Too Little? Trends in the Share of Annuitized Income

This paper examines the importance of annuity-like income as a share of total money income received by aged families. The analysis considers the aged (62) population as a whole as well as different parts of the aged families’ income distribution during the period from the early 1980s through 2009. We use survey data from 1983 through 2009 from the March Current Population Survey (March CPS) and the Survey of Consumer Finances (SCF). The total income amounts reported in the files are compared with data in the National Income and Product Accounts (NIPA). We calculate the family income consisting of annuitized income flows (primarily Social Security and pensions) and measure it as a share of families’ total money income. We also expand the definition of both annuitized and non-annuitized income to include income flows not captured in the surveys, namely, health insurance subsidies and the housing services received by homeowners. Finally, we consider the potential impact on aged families if they were to convert their wealth into private annuities.The paper finds that:-- Despite the shift from defined benefit (DB) to defined contribution (DC) retirement plans, there is little evidence that the annuity-like income share of total income has fallen for aged families – and, in particular, for low-income aged families – over the past three decades.-- This basic result remains unchanged when we consider more comprehensive income definitions and when we focus on aged families with retired heads of family.-- Nonetheless, many middle- and high-income aged families would experience a sizeable increase in monthly income if they annuitized their wealth. The policy implications of the findings are:-- Concerns that reduced rates of annuitization will lead retirees to spend down their assets at a too-rapid rate seem overblown or at least premature; there is little evidence that the share of income derived from annuity-like income sources has declined.-- Contrary to a widespread fear, the shift from DB to DC workplace pensions has not reduced the share of retirement income that consists of relatively secure, annuity-like income flows that will last as long as aged breadwinners and their spouses survive.

A Review of Measurement Error Assessment in a U.S. Household Consumer Expenditure Survey

This paper examines what is known about error in the U.S. Consumer Expenditure Survey (CE). It reviews likely sources of error in consumer expenditure surveys and describes the various approaches that have been used to evaluate estimates from the CE in the United States and from similar surveys around the world. In the United States, many efforts to assess the quality of the CE have compared CE estimates to estimates from other surveys or from the National Income and Product Accounts (NIPA). In addition, other studies have used data internal to the CE in an attempt to assess the level of error. We review studies that take each of these approaches and assess their strengths and weaknesses. Our review shows that, as with other national and international surveys on household spending, the direction and magnitude of measurement errors in the CE are not well understood. The general impression that the CE expenditure estimates are dominated by underreporting is based largely on comparisons of the CE with NIPA estimates. However, other results suggest that the magnitude and direction of errors in the CE depend on the expenditure category examined, characteristics of the respondent and the survey protocol, and the method used to assess these errors. New research clearly is needed to understand the sources of error in surveys collecting consumer expenditure data.

Weather-Adjusting Economic Data

This paper proposes and implements a statistical methodology for adjusting employment data for the effects of deviations in weather from seasonal norms. This is distinct from seasonal adjustment, which controls only for the normal variation in weather across the year. We simultaneously control for both of these effects by integrating a weather adjustment step in the seasonal adjustment process. We use several indicators of weather, including temperature and snowfall. We find that weather effects can be important, shifting the monthly payroll change number by more than 100,000 in either direction. The effects are largest in the winter and early spring months and in the construction sector. A similar methodology is constructed and applied to data in the national income and product accounts (NIPA), although the manner in which NIPA data are reported makes it impossible to integrate weather and seasonal adjustments fully.

The Effect of the California Tobacco Control Program on Smoking Prevalence, Cigarette Consumption, and Healthcare Costs: 1989–2008

BackgroundPrevious research has shown that tobacco control funding in California has reduced per capita cigarette consumption and per capita healthcare expenditures. This paper refines our earlier model by estimating the effect of California tobacco control funding on current smoking prevalence and cigarette consumption per smoker and the effect of prevalence and consumption on per capita healthcare expenditures. The results are used to calculate new estimates of the effect of the California Tobacco Program.Methodology/Principal FindingsUsing state-specific aggregate data, current smoking prevalence and cigarette consumption per smoker are modeled as functions of cumulative California and control states' per capita tobacco control funding, cigarette price, and per capita income. Per capita healthcare expenditures are modeled as a function of prevalence of current smoking, cigarette consumption per smoker, and per capita income. One additional dollar of cumulative per capita tobacco control funding is associated with reduction in current smoking prevalence of 0.0497 (SE.00347) percentage points and current smoker cigarette consumption of 1.39 (SE.132) packs per smoker per year. Reductions of one percentage point in current smoking prevalence and one pack smoked per smoker are associated with $35.4 (SE $9.85) and $3.14 (SE.786) reductions in per capita healthcare expenditure, respectively (2010 dollars), using the National Income and Product Accounts (NIPA) measure of healthcare spending.Conclusions/SignificanceBetween FY 1989 and 2008 the California Tobacco Program cost $2.4 billion and led to cumulative NIPA healthcare expenditure savings of $134 (SE $30.5) billion.