Article

Measuring the Stock of Consumer Durables and its Implications for Euro Area Savings Ratios

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Abstract

The purpose of this article is to estimate the impact of capitalizing durable goods on the euro area household saving ratios and disposable incomes for the first time. The reason for this exercise is twofold. Firstly, it is generally accepted that individual households regard consumer durables as assets even though they are not treated as such in the System of National Accounts 1993 . Secondly, the issue is related to the definition of household saving ratios. For instance, the U.S. Federal Reserve Board publishes three household saving measures. The main difference between these saving ratios is that one is derived by treating expenditure on consumer durables as investments while the other two are compiled by considering them to be household final consumption expenditure. We find that the effect of capitalizing consumer durables on EA saving ratios is moderate. The impact is lower than it is in the U.S. Copyright 2009 The Authors. Journal compilation 2009 International Association for Research in Income and Wealth Published by Blackwell Publishing.

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... We therefore computed the average share of spending on durables within the COICOP three-digit categories using 5-yearly household survey data from Eurostat on detailed consumption expenditure patterns per country. The same approach was previously applied by Jalava and Kavonius (2009) Final consumption expenditure data were collected from Eurostat, OECD, and national statistical institutes. Due to the very long estimated service life of durables in the "personal effects" (COICOP code 12.3.1) ...
... Net stock of dwellings is directly available for four more countries than the gross stock (Norway, Spain, Sweden, and Switzerland), while for others the PIM method would be used (Eurostat, 2013;Eurostat and OECD, 2014). Net stock of consumer durables can be computed from the same data as gross stock (Jalava and Kavonius, 2009). Estimates of the stock of vehicles (gross and net) could be added, disaggregated on a per-household or per-capita basis. ...
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Natural hazards affect many types of tangible assets, the most valuable of which are often residential assets, comprising buildings and household contents. Yet, information necessary to derive exposure in terms of monetary value at the level of individual houses is often not available. This includes building type, size, quality, or age. In this study, we provide a universal method for estimating exposure of residential assets using only publicly available or open data. Using building footprints (polygons) from OpenStreetMap as a starting point, we utilized high-resolution elevation models of 30 European capitals and pan-European raster datasets to construct a Bayesian-network-based model that is able to predict building height. The model was then validated with a dataset of (1) buildings in Poland endangered by sea level rise, for which the number of floors is known, and (2) a sample of Dutch and German houses affected in the past by fluvial and pluvial floods, for which usable floor space area is known. Floor space of buildings is an important basis for approximating their economic value, including household contents. Here, we provide average national-level gross replacement costs of the stock of residential assets in 30 European countries, in nominal and real prices, covering the years 2000–2017. We either relied on existing estimates of the total stock of assets or made new calculations using the perpetual inventory method, which were then translated into exposure per square metre of floor space using data on countries' dwelling stocks. The study shows that the resulting standardized residential exposure values provide much better coverage and consistency compared to previous studies.
... We therefore computed the average share of spending on durables within COICOP 3-digit 230 categories using 5-yearly household survey data from Eurostat on detailed consumption expenditure patterns per country. The same approach was previously applied by Jalava and Kavonius (2009) Table S6. The calculation in eq. 5 was carried out with expenditure time series in real (2015) prices, and then converted to nominal prices using country-and item-specific deflators. ...
... Net stock of dwellings is directly available for four more countries than the gross stock (Norway, Spain, Sweden and Switzerland), while for others PIM method would be used (Eurostat, 2013;Eurostat and OECD, 2014). Net stock of consumer durables can be computed from the same data as gross stock (Jalava and Kavonius, 2009 year 2000. An analysis of the trends in the stock of residential assets and economic factors determining it could possibly also provide insights how could it change in the future, for the benefit of projections of natural hazard risk under climate change. ...
Preprint
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Natural hazards affect many types of tangible assets, the most valuable of which are often residential assets, comprising buildings and household contents. Yet, information necessary to derive exposure in terms of monetary value at the level of individual houses is often not available. This includes building type, size, quality or age. In this study, we provide a universal method for estimating exposure of residential assets using only publicly-available or open data. Using building footprints (polygons) from OpenStreetMap as a starting point, we utilized high-resolution elevation models of 30 European capitals and a set of pan-European raster dataset to construct a Bayesian Network-based model that is able to predict building height. The model was then validated with a dataset of: (1) buildings in Poland endangered by sea level rise, for which the number of floors is known, and (2) a sample of Dutch and German houses affected in the past by fluvial and pluvial floods, for which usable floor space area is known. Floor space of buildings is an important basis for approximating their economic value, including household contents. Here, we provide average national-level gross replacement costs of the stock of residential assets in 30 European countries, in nominal and real prices, covering years 2000–2017. We relied either on existing estimates of the total stock of assets or made new calculations using the Perpetual Inventory Method, which were then translated into exposure per m² of floor space using data on countries' dwelling stocks. The study shows that the resulting standardized residential exposure values provide much better coverage and consistency compared to previous studies.
... Consumer durables are typically treated as final consumption expenditure when purchased by households. Alternatively, the fact that they generate a stream of services or income that raises future consumption possibilities suggests they should be treated as investment expenditure (Browning & Lusardi, 1996;Perozek & Reinsdorf, 2002;Reinsdorf, 2004;Jalava & Kavonius, 2009). As the total outlay on consumer durables is significant, and because their services satisfy a non-trivial component of consumption demand, there is merit in recognising net acquisitions of consumer durables in consumption spending while also acknowledging their investment role. ...
... As the total outlay on consumer durables is significant, and because their services satisfy a non-trivial component of consumption demand, there is merit in recognising net acquisitions of consumer durables in consumption spending while also acknowledging their investment role. To this end, we apply the perpetual inventory method to obtain annual expenditure estimates that correspond to the stock of consumer durables (Jalava & Kavonius, 2009). In view of the underlying ambiguity, and also to analyse the sensitivity of our estimates, we use three alternative specifications of consumption, each including car registration and insurance fees as 100 per cent expenditure for the year, with corresponding specifications for saving (Sav1-Sav3). 1 C1 includes all expenditure on consumer durables for the survey year. 2 C2 includes an imputed value of consumer durables corresponding to a flat 15 per cent depreciation of the stock. ...
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The observed wealth differential in favour of native households seems to contradict the analytical presumption of a saving differential in favour of immigrant households. This article seeks to explain the observed differences in wealth through an examination of the respective saving behaviour of immigrants and natives. Quantile regression and semiparametric decomposition methods are used to identify the saving differential and to isolate the factors that contribute to it. The basic finding is that household income is the key to the differential saving pattern. Moreover, decomposition analysis suggests that immigrants have a tendency to save more than natives when compared with Australian‐born households with similar characteristics. We also find evidence of heterogeneity in immigrant saving behaviour depending on household types and countries of origin.
... Our approach to capital depreciation is in-between that of , who break down the total services provided by durables in proportion of hours of unpaid work, and Fraumeni (1997) or Jalava and Kavonius (2009), who specify depreciation rates for each durable. We do not develop a complete set of depreciation factors for each durable reclassified in GFCF, but borrow from the capital accounts 3 sets of such factors, which are compatible with the PIM: ...
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... Our approach to capital depreciation is in-between that of Landefeld and McCulla (2000), who break down the total services provided by durables in proportion of hours of unpaid work, and Fraumeni (1997) or Jalava and Kavonius (2009), who specify depreciation rates for each durable. We do not develop a complete set of depreciation factors for each durable reclassified in GFCF, but borrow from the capital accounts 3 sets of such factors, which are compatible with the PIM: ...
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  • Harvey Ross
Harvey, Ross, " Comparability of Saving and Profit Ratios, " OECD Meeting of National Accounts Experts, STD/NAES(2003)18, OECD, 2003. Hulten, Charles R., " The 'Architecture' of Capital Accounting: Basic Design Principles, " in Dale W.
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  • Anne Harrison Diewert
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Solomou, Solomos and Martin Weale, " Personal Sector Wealth in the United Kingdom, 1920–56, " Review of Income and Wealth, 43, 297–318, 1997. SNA93 (System of National Accounts 1993), Commission of the European Communities, Interna-tional Monetary Fund, United Nations, World Bank, Brussels/Luxembourg, New York, Paris, Washington, DC, 1993. Review of Income and Wealth, Series 55, Number 1, March 2009 © 2009 The Authors
OECD Manual: Measurement of Aggregate and Industry-level Pro-ductivity Growth ———, OECD Manual: Measuring Capital, draft version 30.05 Alternative Measures of Personal Saving Alternative Measures of Personal Saving
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Katz, Arnold J., " Valuing the Services of Consumer Durables, " Review of Income and Wealth, 29, 405–27, 1983. OECD, Measuring Productivity. OECD Manual: Measurement of Aggregate and Industry-level Pro-ductivity Growth, OECD, Paris, 2001. ———, OECD Manual: Measuring Capital, draft version 30.05.2008, OECD, Paris, 2008. Perozek, Maria G. and Marshall B. Reinsdorf, " Alternative Measures of Personal Saving, " OECD Meeting of National Accounts Experts, STD/NA(2002)8, OECD, 2002. Reinsdorf, Marshall, " Alternative Measures of Personal Saving, " Surveys of Current Business, BEA, February 2007.
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  • Harrison
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Harrison, Anne, " Definition of Economic Assets, " fourth meeting of the Advisory Expert Group on National Accounts (AEG), Frankfurt (SNA/M1.06/14), January/February 2006.
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  • Jorgenson
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A New Architecture for the U.S. National Accounts, NBER Studies in Income and Wealth International Road Federation
Jorgenson, J. Steven Landefeld, and William D. Nordhaus (eds), A New Architecture for the U.S. National Accounts, NBER Studies in Income and Wealth, Volume 66, The University of Chicago Press, 2006. International Road Federation, World Road Statistics, 2005.
Council (EC) Regulation No 2223 on the European system of national and regional accounts in the Community
ESA95 (European System of Accounts 1995), Council (EC) Regulation No 2223/96 of 25 June 1996 on the European system of national and regional accounts in the Community, Official Journal of the European Union, L 310/1-469.
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  • Stephane Grégoir
  • Claudie Louvot
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