Page 159 - Contributed Paper Session (CPS) - Volume 1

CPS1239 Valerie M.B. et al.
activities in the new economic statistics, defined as those that produced goods
or services that could be bought or sold in the market economy. Thus, their
unit value was the price. It was also important to be able to measure the
activities, and the industrial classification developed thus “treat[ed] services as
‘immaterial’ (i.e., everything that is not manufacturing or agriculture), while
ignoring that the activity of services in the economy, as well as the corporate
structure of firms, transcend such classification schemes at any level of
aggregation” (Andersen and Corley 2003). However, as the definition of a
“productive activity” or the definition of a “unit” of service became increasingly
blurred in an age of hi-tech manufacturing, artificial intelligence, and apps that
run on cellphones, the compilation of national accounts as originally
conceived is experiencing serious challenges measuring intangibles
The example of the national accounting of the Korean automobile
company Hyundai illustrates the difficulty of measuring every process. Its
factory in Montgomery, Alabama, in the US, can produce almost 400,000 cars
and trucks per year with 3,000 employees for distribution across North
America, but the company also leases them and finances their purchase, and
its 800 dealerships provide the servicing. Almost all the parts, including
sophisticated electronic components and sensors, are produced elsewhere
around the world. How will national accountants put together Hyundai’s
economic contribution? They will request revenues and costs for all the
operations of Hyundai, and will divide the main activities (primary, secondary,
tertiary activities, etc.). At some reasonable cutoff for the number of “principal”
activities of Hyundai US, they will assign the value added (revenues minus
costs) to the different subsector categories under the NAICS classification.
Leasing, repair, engineering services, logistics, accounting, etc., that are
services contracted out to third parties will be considered a cost for Hyundai
and a revenue for the service providers, so the input-output links will clearly
show that these activities are linked (although presentation of national
accounts on the production side will not show the links). Labor compensation
will be classified depending on the worker’s place of affiliation. Overall, the
value added will be in aggregate fully accounted for in one sector or another.
There are four important problems in this measurement that lead to
undermining the contribution of services to productivity.
• First, the labor productivity of that plant (number of cars per
worker/hour, 400,000 autos per year/300 plant workers in man-
hours) will be solely attributed to the auto manufacturing sector
in the national accounts, and not to the myriad of services that
contributed. Due to bundling of services, batching of computer
programming, robotics installed in earlier years, etc., most of the unit
average costs in that period will be components, parts and utilities,
consumption of fixed capital defined under statutory depreciation

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