Constructing productive ICT capital stock series for Belgium [ Working Paper 12-02 - 13/11/2002]

We are grateful to our colleagues at the Federal Planning Bureau and to staff at the National Accounts Division of the National Bank of Belgium for their comments and suggestions. We also like to thank Marleen Keytsman for her help in preparing the document. All remaining errors are ours.

In this paper, a methodology is proposed for the construction of ICT investment and capital stocks in Belgium. The series are obtained in nominal and in real terms and at macroeconomic as well as sector level. The ICT assets distinguished are IT equipment and communications equipment, leaving software out of the analysis. After calculation of investment expenditure on both assets, the expenditure is transformed into quality-adjusted volume terms by means of harmonised price indices derived from appropriate U.S. indices. Productive capital stocks are calculated by means of the perpetual inventory method, and rental prices of the ICT capital services are obtained as well.

A methodology is proposed in this paper for the construction of ICT investment and capital stock series in real and in nominal terms for Belgium, as well as for the calculation of the rental price of ICT assets. Three ICT assets are distinguished: IT equipment, communications equipment and software.

The method used for the construction of investment expenditures on IT and communications equipment is identical. Therefore, the construction of nominal investment series for these two ICT assets is discussed simultaneously in Section 2. The construction of investment expenditures on software, on the other hand, cannot be based on the same data source and requires other methods. Some suggestions are made in Section 3 but investment and capital stock series for software are not constructed in this report.

Once investment expenditures are obtained, proper price indices are needed to transform ICT investment into base-year efficiency units. The importance of the use of constant-quality price indices for ICT asset has been widely recognised. Ideally, hedonic indices should be used for this purpose; however, as such data are not available for Belgium, harmonised price indices will be used instead. This is the subject of Section 4.

To transform subsequently the real investment series obtained for each ICT asset into a capital stock, the perpetual inventory method is used. The calculation of the productive capital stock is based on the best practice advocated by the OECD (2001). The assumptions involved in the calculations are discussed in Section 5. Section 6 looks at the issues related to the calculation of the capital stock of each ICT asset at the sector level. ICT investment and capital stock series at the sector level are presented for the period 1990-2000 in the appendix at the end of this report.

In the last section of this report, we examine the evolution of the share of ICT investment and capital in total nominal investment and capital stock, respectively, in Belgium. The discussion pertains to the six major sectors over the period 1990-2000. Cross country data is used in order to proceed to an international comparison at the macro and the sector level.