Page 160 - Contributed Paper Session (CPS) - Volume 1

CPS1239 Valerie M.B. et al.
rules, etc. The contribution of services in that period will be small.
Nonetheless, the output would be impossible without the provision of
“indivisible” services with huge economies of scale. Their contribution
cannot be accounted for as a share of the final output if it is included
elsewhere as a stand-alone “service.”
• Second, workers involved in services within the Hyundai plant are
unlikely to even appear as separate services employees in the
accounting, and thus cannot contribute to an increase in services
value added in the national accounts, particularly if they comprise a
small or ancillary cost of production. The extent of servitization
mismeasurement is greater when the service is provided in-house
(Crozet and Milet 2017).
• Third, services are typically priced through bundling, cognizant of
their indivisibility property. It is common for insurance, accounting
services, and TV and phone services to be priced as “monthly services,”
which means that two users of the same plan may use vastly different
amounts of the “bundled” service. In practice, the difference in
productivity derived from the service by each user may be huge. For
example, national accounts will show the “phone services” of the
customer service desk as being equal to the “phone services” of the
staff lounge room and attach to it the bundle price, erroneously
attributing the same value added to these two users. When deflated,
services with different usage rates are assumed to be equally
productive. This is compounded by the lack of homogeneity of the
service unit once used up. Goods, on the other hand, are tangible and
clearly divisible, so their unit value can be more easily measured.
• Finally, there are many services that are becoming almost free
because they rely on a repetitive code that has already been
designed from before, as we rely on an accumulation of
knowledge by others: for example, an algorithm designed to optimize
the shipping routes for Hyundai cars ready for delivery. This has a fixed
cost (charged by the programmers), but no marginal cost. Again,
national accounts may attribute the efficiency of the distribution
process to the manufacturing process itself, when in fact it was the
infinite economies of scale of the network specialist’s algorithm that
enabled this shipping efficiency
Other issues discussed in the literature exacerbate these problems.
However, various studies (for example, IMF 2018) argue that the size of the
estimated effects is insufficient to explain the fall in labor productivity over the
last two decades. Going forward, these issues will lead to large measurement
biases. There are perhaps five main issues that arise: (i) deflators of new goods
or hi-tech goods do not reflect goods’ “unit value” when calculating real GDPs,

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