Beyond the Market Designing Nonmarket Accounts for the United States (2005) / Chapter Skim
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7 The Government and Private Nonprofit Sectors
7 The Government and Private Nonprofit Sectors
Pages 141-162
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From page 141... ...
, 1For an analysis of the roles of governmental organizations relative to private nonprofit organizations in public goods markets, see Weisbrod (1975)
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From page 142... ...
. In keeping with standard practice, the outputs of the government and nonprofit sectors in the National Income and Product Accounts (NIPAs)
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The BEA has historically maintained data on income and outlays of nonprofit institutions as part of the personal sector, which by convention includes nonprofit organizations serving households. Young (1993)
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From page 144... ...
, making it difficult to obtain a unified picture of its activities. Similar to their treatment of government, national accounting structures generally do not measure the output of nonprofit organizations independently from the inputs used in producing that output, something that should be a goal for a nonprofit satellite account.
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From page 145... ...
These are essentially the organizations that are providers of public goods, rather than providers of private outputs to their members. Nonprofit organizations that use mainly purchased inputs are similar to government entities in that the prices and quantities of these inputs register in the national accounts.
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From page 146... ...
to pay. Nonetheless, satellite accounts that include in-kind donations to government and nonprofit organizations could shed light on currently unmeasured economic inputs.
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From page 147... ...
. Other more specialized examples of volunteer employment include accountants who help low-income people prepare their income tax returns and Earned Income Tax Credit applications, lawyers who provide pro bono legal services, and corporate executives who serve on the boards of directors of nonprofit organizations.
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From page 148... ...
For example, time spent volunteering at a hospital is an input to health sector output, and time spent volunteering at a school is an input to education sector output. This potential overlap should not be avoided, but it means that analysts and users of data from the separate satellite accounts should be cautious to avoid double-counting of outputs.
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From page 149... ...
Thus, the observed market price of zero likely understates the marginal productivity of volunteer hours. In this case, valuing volunteer time at its observed price produces downward-biased estimates of its contribution to economic output.
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For the household production account, the panel advocates a modified replacement cost approach (see Chapter 3) , and there is considerable appeal to using the same approach for the almost parallel situation of volunteer activity.
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From page 151... ...
In equilibrium, a person seeks to equate the marginal value of time in all three uses, subject to the non-negativity constraint. The marginal value of time devoted to leisure or volunteer work is just the marginal utility associated with the activity; the value of market work equals the wage that is earned by working less the disutility, if any, associated with the performance of that work.
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From page 152... ...
To the extent possible, this replacement cost approach should be modified to reflect skill and effort differences between volunteer and paid labor. If productivity adjustments cannot be made, we suspect that the replacement labor wage generally will represent an upper bound on the value of volunteer time inputs.
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From page 153... ...
Estimating replacement costs to recipient organizations is an option for valuing donated goods, just as it is for valuing volunteer labor. It should be noted, however, that just as in the discussion of how to value volunteer time, it is by no means clear that recipient organizations would, in the absence of the donations, purchase the donated goods at anything close to the observed market prices.
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From page 154... ...
; the goal of this work is monetary valuations. In a similar spirit, the SNA categorizes physical output measures for 11 nonprofit sector groups (United Nations, 2003)
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From page 155... ...
In some situations, outputs of governments or nonprofit organizations are not sold at a positive price because they are difficult or impossible to sell -- as is the case with collective goods such as national defense, basic medical research, and environmental protection. In other cases, when outputs could be sold (e.g., education)
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From page 156... ...
For aggregate welfare measurement purposes, and to measure changes in welfare over time and across countries, information on consumer surplus is conceptually both relevant and important; the inclusion of consumer surplus in a satellite account for government or the nonprofit sector, however, would make that account incompatible with the NIPAs. Even with a narrower focus on marginal valuations, problems associated with outputs having prices of zero remain.
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From page 157... ...
The benefit component of benefit-cost analysis requires, conceptually, valuation of the aggregate willingness to pay for the proposed outputs, amounts that encompass the total area under all beneficiaries' demand functions, not simply estimates of the marginal value to society of the dam, the environmental protection, or the research. Acknowledging the difference between measurement for benefit-cost analysis and measurement for consistency with national economic accounting is critical for both the government and nonprofit sectors.
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From page 158... ...
The GAAP convention on imputation of charitable health care and education activities has been developed with respect to private nonprofit organizations, yet the fundamental issue it addresses is far broader. The grossing up of revenue, or more generally of output, to value unpriced output poses conceptual problems of value imputation at both the private accounting and national accounting levels.
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From page 159... ...
First, for documenting activity in the nonprofit sector, improved access is needed to existing administrative records -- including forms that organizations file with the IRS, as well as other financial statements and records. The Urban Institute's recent initiative has made the IRS Form 990 information easily accessible for anyone with an Internet connection, but there is other useful information that remains inaccessible.
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From page 160... ...
Shadow wages based on similar paid occupations would be a sensible starting point, but research to assess the relative productivity of paid and volunteer labor performing similar tasks also would be worthwhile. CONCLUSIONS In considering how to progress with research to develop government and nonprofit satellite accounts, it is important to keep clear the distinction between what is optimal conceptually versus what is the best that can be done operationally.
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From page 161... ...
Nonprofit organizations and volunteer labor operate conspicuously and independently across many sectors of the economy. Volunteer labor is offered not just to nonprofit institutions, but also to government and other organizations, and nonprofit as well as governmental organizations utilize both paid and volunteer workers.
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From page 162... ...
In advocating the development of a nonprofit satellite account, we are in essence making the case for expansion of the ownership criterion to include separate designation of the nonprofit form. For some purposes, one may wish to know, for example, the size and activity levels of the hospital and education industries, and their changes over time.
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