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Beyond the Market: Designing Nonmarket Accounts for the United States
state and local governments. These grants-in-aid accounted for no more than 3 percent of education spending by state and local governments from the 1950s through the mid-1960s. This percentage at least doubled through the early 1970s, then dropped to at most 5 percent during the 1990s. Spending on higher education in the last quarter of the twentieth century accounted for 50-60 percent of the total private educational services spending included in GDP; the share of vocational schools and other “not elsewhere classified” spending increased to about 25 percent, and the share of elementary and secondary schools decreased to 20 percent over the last few years.
None of the BEA’s GDP-by-industry estimates include all of the capital input costs associated with the provision of education. Information on a portion of the relevant investment and capital stocks, which could be used to estimate full capital costs, is available from BEA. It includes investment and capital stocks of the private educational services industry and educational structures held either by the federal or by state and local governments. The full capital service flow corresponding to these stocks, and others, could be estimated by making assumptions regarding the net return to capital; the depreciation component of the capital service flow is already included in GDP (see National Research Council, 1998). We do not detail the methodology that could be used, except to note that capital input to education is probably understated in GDP.8 To allow for comparisons across time and for productivity estimation, a measure of the real inputs to education is needed. Such a measure could be readily constructed for market inputs using data from the BEA that are available as of the fall of 2004.
Since public education is an obvious near-market activity, it makes sense to measure inputs and outputs in the same way for public and private schooling. It would be useful to have consistent methodology and coverage for the government-provided and privately provided education categories in the national accounts. In addition, it would be helpful if estimates of GDP for private educational services were available by subcategory, disaggregated at least for primary, secondary, higher, and other education. Such disaggregation would allow for analysis of public and private education by level (primary, secondary, and higher education), as well as for all levels combined.
Another way to summarize direct monetary inputs to education is by type of expenditure—that is, salaries, capital costs, operation, and other. As already noted, public elementary and secondary schools make up the largest part of spending on education; Garrison and Krueger (2004) provide estimates for this category, broken down by expenditures on instruction, administration, plant maintenance and operation, fixed charges and other school services, and capital outlays. The largest expenditure is for salaries—the main component of the instruction and administration categories.
Murphy (1982) estimates the capital service flow (cost of capital services) for school structures owned by governments and nonprofits institutions; he assumes that the net return is positive.