Welfare Effects
The benefits of improvements to registry systems, and government-based registry systems in particular, arising from the use of ICTs, do not necessarily appear in national statistics. Improved accuracy (quality) of reports is not well captured in national accounts. In many cases the outputs are either not traded (e.g. the registry must produce reports as part of the total contract remuneration) or the prices paid are set by statutory processes or the costs of physically producing outputs, leaving no room for users of the outputs to place different values on reports of differing accuracy. Even though EEC is recording very significant improvements in the accuracy of the register, the macro-economic statistics do not capture any change in the price of the outputs. This contrasts with the services of a register for which the outputs are paid - for example, the Domain Name register that maintains the list matching firms' internet domain names and the physical Internet Protocol (IP) addresses of the computers on which the web sites are hosted.
This factor masks a larger problem in recording the productivity improvements engendered from government investment in ICTs. Whilst government investment in ICT capital is recorded in the New Zealand national stock, the outputs it is used to produce are far more likely to form part of the non-traded sector of the economy. If the products which the ICTs are used to produce are not traded, then the values of inputs used to create the products (including the ICT investments) are counted as costs, but the changing output values from improved product quality are not recorded as increases in benefits in the national GDP. As a significant component of the government's activity involves the collection, storage, processing and transmission of information underpinned by use of ICTs, a significant proportion of the output "value" created by the government's share of ICT investment goes uncaptured in GDP figures.
Whilst the "unmeasured benefit" problem is not confined solely to the government sector (it is a factor in the service sector generally - Bosworth and Triplett, 1998), the absence of any prices to signal the value customers place upon the product and product quality changes arising from the use of ICTs in the government sector is especially problematic. The larger the government's share of the economy, and especially the larger the government's share of the ICT-intensive sectors of the economy for which product prices are not struck (for example, health and education), then the larger the extent of the "unmeasured benefit" problem is. As government's share of GDP in New Zealand is approaching 40%, the potential for this effect would appear to be quite large. This does not mean that the benefits from ICTs are not being accrued - they are. Rather, it identifies that significant benefits may be not well captured in New Zealand accounts due to the nature of the New Zealand methods of accounting for government-provided services, whereas these factors may be partially or more completely reflected in the GDP of comparator countries where different charging regimes apply. This makes direct comparisons between countries at the gross macroeconomic level problematic.
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