Presentation is loading. Please wait.

Presentation is loading. Please wait.

Depreciation in EU Member States Bernd Görzig. EU 6 th Framework Programme Bernd Görzig 9.6.2005 Overview n Introduction n Depreciation in EU countries.

Similar presentations


Presentation on theme: "Depreciation in EU Member States Bernd Görzig. EU 6 th Framework Programme Bernd Görzig 9.6.2005 Overview n Introduction n Depreciation in EU countries."— Presentation transcript:

1 Depreciation in EU Member States Bernd Görzig

2 EU 6 th Framework Programme Bernd Görzig Overview n Introduction n Depreciation in EU countries n Measurement of depreciation n Impact of service life assumptions n Conclusions

3 EU 6 th Framework Programme Bernd Görzig Introduction n CFC ratio: u Depreciation / Net domestic product (NDP) at factor costs n CFC ratios in EU member states differ between u 11 % in Greece, and u 24 % in Finland

4 EU 6 th Framework Programme Bernd Görzig Depreciation in NDP* * At factor costs EU15

5 EU 6 th Framework Programme Bernd Görzig Economic Theory suggests: n Production Functions u Demographic and geographic factors è Mountainous or flat, shape and borders, population density and composition, institutions, culture, a. o. n Market Structures u Monopolised markets è Protected output markets, è Input markets (labour, capital), institutional settings, a. o. u Economic specialisation è Heavy or light industries, small and big countries, intensity of use, a.o.

6 EU 6 th Framework Programme Bernd Görzig Selected Indicators and CFC Ratio

7 EU 6 th Framework Programme Bernd Görzig Depreciation and Services EU15 Coefficient of Correlation with CFC ratio: Excluding Finland : Greece: I B FIN PDK D NL A IRL L GR GB E SF

8 EU 6 th Framework Programme Bernd Görzig Depreciation and Income Distribution EU15 Coefficient of Correlation with CFC ratio: Excluding Finland : Greece: F D B NL FIN E A IRL S GR DK L P GB I

9 EU 6 th Framework Programme Bernd Görzig Possible Impact of Depreciation Differences n GDP u CFC is part of value added for non-market producer è Political implications n Operating surplus (incl. mixed income) u Changes with CFC è Analytical implications

10 EU 6 th Framework Programme Bernd Görzig Assessment for non-market activities Percentage change of GDP with same CFC ratio in all countries

11 EU 6 th Framework Programme Bernd Görzig Assessment for market activities Percentage change of Operating Surplus with same CFC ratio in all countries

12 EU 6 th Framework Programme Bernd Görzig Results n Some differences in CFC ratios of EU member states might be explainable n However: u Measurement differences cannot be excluded

13 EU 6 th Framework Programme Bernd Görzig Differences in CFC Measurement n Sources u Depreciation u Capital stock u Service lives n Service lives: degree of differentiation n Service lives: comparisons n Models n Depreciation schedule

14 EU 6 th Framework Programme Bernd Görzig Sources of Depreciation n Direct observation (only Ireland, some new member states) n Gross or net capital stock (most countries)

15 EU 6 th Framework Programme Bernd Görzig Sources of Capital Stock n Direct observation u Survey (mainly new member states) u Administrative register n Perpetual inventory method u Model based è Discard function (most countries) è BEA model (2 countries) u Survey based è BFA approach (some new member states)

16 EU 6 th Framework Programme Bernd Görzig Service Lives: 12 years instead of 10 years, is that important? n In general a 20% increase in service life leads to: u Capital stock: + 20 % u Depreciation - 20 % n In Germany total economy 2001: u Net operating surplus + 14%, but u Rate of return on net stock - 8 %

17 EU 6 th Framework Programme Bernd Görzig Service Lives: Sources n Tax register n Experts advice n Survey n Other countries estimate

18 EU 6 th Framework Programme Bernd Görzig Service Lives: Breakdown of estimates n Asset breakdown for Service Lives ranges from u AN classification (mainly: 4 tangibles, 3 intangibles) to u > 400 types of asset n Additional industry breakdown u Applied by many countries for calculating capital stock u Rarely with specific Service Life for the particular industries

19 EU 6 th Framework Programme Bernd Görzig Service Lives: Difficulties of comparisons n Role of Service Life in geometric depreciation is different from the linear case n Comparison possible only for specified assets

20 EU 6 th Framework Programme Bernd Görzig Comparison of Service Lives

21 EU 6 th Framework Programme Bernd Görzig What have we learned? n Variety of methods, but n Are we able to u Quantify their impact on depreciation? u Separate between è Economic and è Methodological influences? u Separate between the various components of the applied methods? u Separate the impact of the underlying service life assumptions?

22 EU 6 th Framework Programme Bernd Görzig The Inverse PIM Model (InvPIM) n PIM u Input: è Investment time series è Estimate for the average service life u Output: è Depreciation è Capital stock n InvPIM u Input è Available depreciation figures è Available investment figures u Output è Service life estimate è Necessary additional investment

23 EU 6 th Framework Programme Bernd Görzig Results of InvPIM n Good adaptation for most countries n Not plausible results need u Additional research u Better and more investment data

24 EU 6 th Framework Programme Bernd Görzig Service Life Estimates by InvPIM

25 EU 6 th Framework Programme Bernd Görzig Best results of InvPIM

26 EU 6 th Framework Programme Bernd Görzig Worst results of InvPIM

27 EU 6 th Framework Programme Bernd Görzig High Service Lives in InvPIM

28 EU 6 th Framework Programme Bernd Görzig Depreciation and Service Lives EU15 Coefficient of Correlation with CFC ratio: Excluding Finland : Greece: NL D FIN E A IRL S GR DK FL UK I P B

29 EU 6 th Framework Programme Bernd Görzig Conclusions n CFC ratios in European Economies vary considerably u No unique explanation possible u Impact of Service life assumptions seems to be overestimated n More research in the impact of methodological differences necessary

30 EU 6 th Framework Programme Bernd Görzig Questions for the consortium n Can we change national depreciation figures? n How is the movement of assets between industries considered?

31 Depreciation in EU Member States Bernd Görzig Thank you for listening


Download ppt "Depreciation in EU Member States Bernd Görzig. EU 6 th Framework Programme Bernd Görzig 9.6.2005 Overview n Introduction n Depreciation in EU countries."

Similar presentations


Ads by Google