Erika Schulz, Laura Beckmann
Instituto Valenciano de Investigaciones Económicas,
(SPINTAN Working Paper Series ; 9)
This paper sets out a framework for the analysis of public investments, tangible and intangible, at the level of detail needed for the economic analysis of impacts of public policies influencing economic growth. To do this, we broaden the concept of capital in the public sector from that which is mostly tangible (e.g. physical infrastructure) to that which also includes intangibles and long-lasting societal assets. We also need to overcome some significant measurement challenges, such as the accounting treatment of returns to public capital and the assignment of public capital and relevant expenditures, including tax expenditures, to industries. All told, for the analysis of public investments, we find that national accounts need to (a) impute a net return to government capital, (b) disaggregate industries by institutional sector of origin, (c) use industry capital compensation measured to include all public payments, and (d) where relevant, build crosswalks for components of government expenditure by function of government to industries.