From the December 1998 SURVEY OF CURRENT
BUSINESSThis article presents the 1992 capital flow table (CFT) as a supplementary table to the 1992 benchmark input-output (I-O) accounts./1/ The CFT shows the flows of new structures and equipment to the private industries that purchased or leased them in 1992. The I-O accounts and the gross domestic product (GDP) estimates in the national income and product accounts (NIPA's) record investment by type, but they do not provide a breakdown of this investment by industry. The CFT provides a crosswalk from investment by type of structure and equipment to investment by type and by industry.
CFT's are used in a variety of analytical and statistical contexts, including analyses of the demand by industry for particular types of structures and equipment, analyses of the impact of changes in tax laws that affect investment across industries, and as a framework for constructing industry-by-industry capital stocks and other statistical series. The 1992 CFT is the sixth in a series of tables that have supplemented earlier benchmark I-O accounts in 1963, 1967, 1972, 1977, and 1982./2/
The CFT shows the use of new structures and equipment by industries regardless of ownership. The use of new structures and equipment is assumed to be more stable than ownership, which is frequently based on institutional or financial considerations rather than on technical considerations.
The industries in the 1992 CFT are defined along the lines of the 1987 Standard Industrial Classification (SIC) system./3/ Much of the economic data available on an industry basis are classified on the SIC basis. Traditionally, the I-O accounts and capital flows are prepared using I-O classifications in which industries are redefined from a SIC basis to an I-O basis in order to better align inputs and outputs and to produce more homogeneous and consistent industries./4/ However, for the 1992 CFT, a decision was made to classify the industries on an SIC basis in order to facilitate comparisons of these industry estimates with other SIC-based industry estimates prepared by the Bureau of Economic Analysis (BEA) and other agencies. BEA also prepared alternative I-O accounts for 1992 on an SIC basis./5/
This article describes the 1992 CFT, illustrates how the CFT is used and discusses the valuations and classifications that underlie the CFT and the methods and data that were used to prepare it. The 1992 CFT provides estimates of the allocation of investment in 163 types of equipment and structures across 64 industries./6/ The CFT also provides a companion allocation of investment in the 46 types of equipment and structures included in gross private fixed investment (GPFI) in the NIPA's across the same 64 industries./7/
The relationship between the CFT and the alternative I-O use table is illustrated in chart 1. The use table is shown in the upper panel of the chart, and the CFT is shown in the lower panel. In the use table, the rows show the commodities—the raw materials, semifinished goods, and services—that are either consumed by industries or sold to final consumers shown in the columns. The structures and equipment purchased by industries are shown as sales to GPFI, a component of final uses. As the chart indicates, the CFT expands GPFI from the use table to show the flows of new structures and equipment to using industries. Each column of the CFT shows the use by the industry identified in the column header of new structures and equipment identified by the row header; the column sum represents the total use of new structures and equipment by the industry identified in the column header. Each row shows the distribution of new structures and equipment identified by the row header to using industries identified by the column header; the row sum represents the total value of new structures and equipment purchased by industries in 1992.
The CFT and the GPFI in the use table do not include all of the same items. The CFT shows only the new structures and new equipment by using industries and the real estate commissions on the sales of new structures; it does not include purchases of scrap, net purchases of used goods, and real estate commissions on the sales of used structures. GPFI includes new structures and equipment, purchases of scrap, net purchases of used goods, and real estate commissions on the sales of both new and used structures./8/
Table A reconciles GPFI in the use table with GPFI in the CFT. It shows in the first column the value of GPFI for each type of structures and equipment category from the I-O use table. The second column shows the value of scrap, net purchases of used goods, and commissions on the sale of used structures that are included in the use table but excluded from the CFT. The third column shows, for each type of structures and equipment category, the value in the CFT.
The data in the CFT are presented in two tables: The value in producers' prices of each capital commodity by each using industry in table 1; and the value in purchasers' prices of the new structures and equipment by using industries in table 2. Transactions in commodities are valued at producers' prices in the I-O accounts. These prices exclude distribution costs (wholesale and retail trade margins and transportation costs), but they include excise taxes collected by producers. Transportation costs and trade margins are shown as separate purchases by the users of the commodities. The sum of the producers' value, transportation cost, and trade margins equals the purchasers' value.
Table 1 shows in each row the I-O commodity in producers' prices by the using industry in each column. For example, $5.7 billion of the commodity "construction machinery" (commodity 3531) is acquired by the industry "construction" (industry 1567); other users of construction machinery are the mining industries and the petroleum industry. The CFT also shows, down the columns, the detail on the composition of capital commodities by using industries. For example, the agriculture industry (industry 102) acquired $13.9 billion of capital commodities, of which $6.0 billion was the commodity "farm machinery and equipment" (commodity 3523), $1.3 billion was the commodity "motor vehicles and passenger car bodies" (commodity 3711), and $2.4 billion was the commodity "farm service facilities."
Table 2 is shown in two parts: Equipment and structures. In the upper part, each row shows the capital equipment category in purchasers' prices by using industries in each column. For example, the capital commodity category "tractors" is acquired by the industries "agriculture" ($2.8 billion) and "agricultural services" ($1.8 billion). The total for each column shows total new equipment by each using industry. The total for each row shows total new equipment for each capital commodity category.
In the lower part of table 2, each row shows the capital structures commodity in purchasers' prices by using industries in each column. For example, the capital commodities category "educational buildings" is acquired by the industry "education services." The total for each column shows total new structures by each using industry. The total for each row shows total new structures for each capital commodity category.
Capital flow information has a variety of uses that include its use as an analytical tool for studying the market for capital commodities and its use as a statistical framework and data source for preparing other economic statistics. This section describes the uses of the CFT, and it describes some of the assumptions that analysts and statisticians must make when they use the CFT.
Analytical uses.—The CFT is an important analytical tool because it provides information that can be used to supplement the information in the GPFI column of the I-O use table. For example, the CFT provides information on the markets for capital commodities because it disaggregates information in the GPFI column of the I-O use table by showing the distribution of capital commodities to using private industries. Another use of the CFT is to show the entire distribution of a commodity to users. The use table shows the distribution of commodities to intermediate users and final users, and the CFT expands the GPFI column in the use table to show all users of capital commodities. The CFT can be used to analyze the impact of changes in tax laws affecting investment across industries. The presentation of the CFT on an approximate SIC basis facilitates its use with other SIC-based data, such as employment, gross product originating by industry, and capital stock data.
The CFT provides information that can be used to estimate the effects of a change in capital purchases by an industry on the commodity output of all industries. The CFT information on the types of capital commodities used by an industry is used to translate a specified change in the level of total investment by the industry into a distribution of changes in purchased capital by commodity. These changes can then be multiplied by the commodity-by-commodity total requirements coefficients to estimate the output by commodity that is required to support the change in investment. Similarly, the CFT—with appropriate adjustments—can be used with the I-O industry-by-commodity total requirements table to show the effects of a change in an industry's purchase of capital commodities on output by industry./9/
When the CFT and either the commodity-by-commodity total requirements coefficients or the industry-by-commodity total requirements coefficients are used to estimate the effects of changes in the purchase of capital commodities on industries and commodities, the underlying I-O assumptions have to be kept in mind. For example, the CFT is based on information about industries' purchases of capital commodities in 1992. The patterns and levels of investment in 1992 may not reflect those of investment in other years.
Statistical uses.—The CFT is also used as a framework and data source for preparing other economic statistics. For example, information from the CFT is used to prepare BEA's estimates of fixed reproducible tangible wealth by industry./10/
Classification.—The classification of industries in the CFT is based on the 1987 SIC system, which classifies establishments into industries on the basis of the primary activity of the establishment./11/
The CFT shows the investment in 1992 by private industries in new structures and equipment on a user basis. Capital commodities are included as investment by the using industry whether they are purchased outright or leased, and regardless of the type of lease. For private establishments engaged in capital leasing—that is leases in which payments over the term of the lease cover the costs of the commodity and usually result in eventual ownership of the leased commodity by the lessee—or in other types of leasing, the CFT shows the commodity as being used by the industry of the lessee. However, if the lessee is a government agency or a person, the CFT shows the commodity as being used by the industry of the lessor.
Valuation.—The CFT is presented in producers' prices (table 1) and in purchasers' prices (table 2). Producers' prices exclude distribution costs (wholesale and retail trade margins and transportation costs), but they include excise taxes collected by producers.
In order to show the relationship between the production of capital commodities and their use by industries, the CFT shows commodities as if they moved directly to users. Wholesale and retail trade margins on commodities are shown as purchases by users and are included in the trade rows of table 1. All transportation costs are shown as a purchase by users and are included in the transportation row of table 1.
The CFT was prepared in four steps. First, information on total expenditures for capital commodities for each industry were compiled. The primary data source for total expenditures by industry was the 1992 economic census of the Bureau of the Census. Additional data were obtained from the Census Bureau's Annual Capital Expenditures Survey, which includes tabulations of investment in structures and equipment by nonfarm businesses, and from the Farm Costs and Returns Survey of the U.S. Department of Agriculture.
In addition, several adjustments were made to the expenditures data:
Second, expenditures for new structures and equipment were distributed to using industries. Because most types of equipment and some types of structures are used by more than one industry, most of the distributions were made in proportion to an occupational-employment-by-industry matrix from the Bureau of Labor Statistics./16/ The use of this matrix assumes that the use of a type of equipment or structure is correlated with the related occupational employment; for example, anesthesia apparatus and blood transfusion equipment was distributed by industry on the basis of the number of health technicians and technologists and of surgical technologists that were employed by various industries in 1992.
The use of these employment-by-industry ratios to allocate capital commodities works best when capital-labor ratios across industries are relatively stable and when the types of capital and labor included in the associated types of equipment and structures and occupational employment categories are relatively homogeneous. Unfortunately, detailed data on purchases or leases by type of capital and by industry are not available to adequately assess the extent to which the estimates based on employment information approximate actual purchases or leases.
Third, expenditures for equipment and structures were summed to industry totals. These totals were then compared with the initial estimates of total industry expenditures in order to evaluate the industry controls. Then, the sum of the industry controls was adjusted to the total value of new structures and equipment from GPFI. An iterative balancing procedure was used to insure that all column sums and row sums added to their respective control totals.
Fourth, transportation costs and trade margins were estimated in order to determine CFT values in producers' values. The structures and equipment estimates were aggregated to approximately a four-digit SIC commodity level and to a GPFI category level.
Footnotes:
1. See Ann M. Lawson, "Benchmark Input-Output Accounts for the U.S. Economy, 1992: Make, Use, and Supplementary Tables," SURVEY OF CURRENT BUSINESS 77 (November 1997): 36–82; and "Benchmark Input-Output Accounts for the U.S. Economy, 1992: Requirements Tables," SURVEY 77 (December 1997): 22–47.
2. The tables for 1963, 1967, 1972, and 1977 were presented in the August 1972, September 1975, July 1980, and November 1985 issues of the SURVEY, respectively. The 1982 table was not published, but it is available on request (see the box "Data Availability" on page 30). No table was prepared for 1987.
3. See "Appendix A.—Classification of Industries in the 1992 Capital Flow Table."
4. The 1997 I-O accounts will be prepared using the new North American Industry Classification System, which replaces the SIC.
5. See Benchmark Input-Output Accounts of the United States, 1992 (Washington DC: U.S. Government Printing Office, September 1998). See also the box "Data Availability."
6. See "Appendix B.—Classification of Commodities in the 1992 Capital Flow Table."
7. In the NIPA's, structures are shown in table 5.6, and producers' durable equipment is shown in table 5.8.
8. Gross domestic product (GDP), of which GPFI is one component, is the market value of the goods and services produced by labor and property located in the United States. Transactions in used assets are excluded from GDP because they do not reflect current production activity; however, transactions in used assets between the business sector and persons, governments, and foreigners are added as purchases by the buying sector and subtracted from the selling sector.
9. The I-O industry-by-commodity total requirements table contains the input requirements coefficients for the output from each industry that is directly and indirectly required to deliver a dollar of a commodity to final users. However, for this analysis, the CFT must be converted to an I-O basis, or a total requirements table that is based on the alternative SIC accounts must be prepared, because the CFT and the I-O industry-by-commodity total requirements tables show industries defined on a different basis.
10. The CFT provides information on the investment flows that are needed for perpetual inventory estimates used to derive estimates of fixed private capital by industry, which is based on the 1987 SIC. However, the CFT estimates differ from the fixed private capital estimates because the CFT estimates are on a using-industry basis, and the fixed private capital estimates are on an ownership basis. See Bureau of Economic Analysis (BEA), Fixed Reproducible Tangible Wealth in the United States, 1925–96 [CD-ROM] (Washington, DC: BEA, 1998, product number NCN–0136); and "Fixed Reproducible Tangible Wealth in the United States: Revised Estimates for 1995–97 and Summary Estimates for 1925–97," SURVEY 78 (September 1998): 36–46. For an explanation of the methodology used, see Arnold J. Katz and Shelby W. Herman, "Improved Estimates of Fixed Reproducible Tangible Wealth, 1929–95," SURVEY 77 (May 1997): 70–76.
11. Establishments are defined as economic units that are typically at a single location where business is conducted or where services or industrial operations are performed.
12. This adjustment includes estimates for nonpayroll firms in mining, manufacturing, and wholesale trade; for auxiliary establishments in mining and manufacturing; for capital expenditures not collected in the economic censuses for transportation, communications, utilities, finance, insurance, real estate, and some services; and for agriculture and agriculture services.
13. This adjustment is made, because, in some cases, the Census Bureau data reflect tax return records. The tax return data must be adjusted to account for nonfilers and for filers who misreport information to the Internal Revenue Service. Capital expenditures based on Census Bureau data are similarly adjusted to account for the expenditures of nonfilers and filers who misreport. See Robert P. Parker, "Improved Adjustments for Misreporting of Tax Return Information Used to Estimate the National Income and Product Accounts, 1977," SURVEY 64 (June 1984): 17–25.
14. Expensed new motor vehicles that are retained for less than a full accounting period by the auto rental industry and expenditures for petroleum and natural gas well drilling, exploration, and other mining exploration are not reported as investment to the Census Bureau. The expenditures are recorded as investment items in the construction industry in the CFT. Nonfarm business use of personal motor vehicles represents personally owned motor vehicles used for business purposes; in national economic accounting, purchases of these "mixed-use" vehicles are allocated between consumer and business purchasers on the basis of the mileage driven for business purposes.
15. Force-account new construction is new construction work performed by and for establishments classified according to the SIC in nonconstruction industries. In both the alternative I-O and in the CFT, the value of such work is included in the output of the construction industry rather than in the industry in which the work is performed.
16. Unpublished data from the 1992–2005 National Industry/Occupation Matrix provided by the Bureau of Labor Statistics, Office of Employment Projections.
