From: Jurriaan Bendien (adsl675281@TISCALI.NL)
Date: Sat Dec 24 2005 - 17:13:17 EST
As we know, the official national accounts concept of value-added includes the imputed rental value of owner-occupied housing (OOH). This is the average market-based rent that all domestically resident owner-occupiers together would get, "if" they rented out their housing, and it is a component of GDP (gross value added), whether measured according to income, product, or expenditure method. Some feminist theorists complain that the value of housework is not included in GDP, but, it could be argued at least you have this imputed rent included. Of course, in reality, most owner-occupiers do not rent out their housing, precisely because they occupy it themselves, either freehold or paying mortgage to a financial institution (though some might rent out part of the house etc.). It's an imputation only, which does not measure any really existing transaction volume, and strictly speaking, it's a fiction that makes sense only in terms of a value theory in neoclassical economics, according to which people earn rents from property ownership although they don't earn them (the treatment of rents in national accounts is a separate story; in general, you can say that, if business enterprises rent more productive assets rather than owning them, GDP is reduced, and vice versa, if they own more, GDP is increased; conceptually land rents, subsoil rents and rents in respect of financial assets are excluded altogether from GDP, and do not enter into the conventional national income measures). However, what now is the real magnitude of the effect of OOH? From the US online NIPA data set conveniently provided by the Bureau of Economic Analysis, one can get figures to assess the overall quantitative implication for the output total (annual figures in billions of current US$ and rounded percentages to one decimal point; I've used Table 7.4.5 for OOH). 1960 OOH = 31.3 GDP = 526.4 percentage contribution of OOH to GDP = 5.9% 1970 OOH = 61.3 GDP = 1,038.5 percentage contribution of OOH to GDP = 5.9% 1980 OOH = 178.4 GDP = 2,789.5 percentage contribution of OOH to GDP = 6.4% 1985 OOH = 280.8 GDP = 4,220.3 percentage contribution of OOH to GDP = 6.7% 1990 OOH = 412.8 GDP = 5,803.1 percentage contribution of OOH to GDP = 7.1% 1995 OOH = 531.2 GDP = 7,397.7 percentage contribution of OOH to GDP = 7.2% 2004 OOH = 1,145.2 GDP = 11,734.3 percentage contribution of OOH to GDP = 9.8% As you can see, the fraction keeps creeping up, and soon it will be double what it was in 1970, first breaking that magic 10% of US GDP barrier, especially given that home ownership among the US population has, with easy credit, strongly increased (in 2004, there were 112 million US households of which 77 million were privately owned, i.e. 68.8%. In 1976, the earliest year for which I could find census data, it was about 42.7%. So anyway, as you can see, just as with business enterprises, if more people *own* homes rather than *rent* them, official total productivity measures increase, and official total net output and GDP goes up. Yeah, you can say OOH!! Jurriaan It's been a hard day's night, and I've been working like a dog It's been a hard day's night, I should be sleeping like a log But when I get home to you, I'll find the things that you do Will make me feel alright...
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