Derek Blades

Crime: What Should be Recorded in the National Accounts; and What Difference Would it Make?

There is a widespread belief that the national accounts give a biased view of economic development because they omit the “shadow economy”. The shadow economy is usually defined as consisting of two parts — illegal activities and activities that are legal in themselves but are carried out clandestinely so as to evade taxes. This paper deals with the first component. It considers what types of illegal transactions should, in principle, be included in the national accounts and presents “orders of magnitude” estimates suggesting that full coverage of illegal activities would have added, at most, only about 2 1/2 % to United States’ GDP in 1975. Since illegal activities are probably less important in other industrialised countries, the illegal part of the shadow economy appears to be relatively trivial.

A Short‐Cut Method of Estimating Capital Stocks: When Can it Be Used and How Well Does it Work?

Relatively few countries currently publish estimates of capital stocks because of the difficulty of applying the Perpetual Inventory Method. A short�?cut method which we term the Steady Growth Model (SGM) can produce plausible capital stock estimates provided certain conditions are met. Starting with a database covering 146 countries we conclude that the SGM can legitimately be used to calculate capital stocks for 53 of them. The 53 include equal numbers of high�?income and low�?income countries. The SGM requires only data on gross fixed capital formation for the base year, information about past growth rates of real GFCF, and assumptions about rates of depreciation. Despite its apparent simplicity, we show that our SGM stock estimates compare well with official stock estimates generated by the PIM. Other tests on capital–output ratios and capital�?stocks per head confirm the plausibility of stock estimates generated by SGM.

In Memoriam: Ann Chadeau (1944–2002)

Ann Chadeau died in April this year after a long illness. She was 58. Ann was an active member of our Association for many years, serving on the Editorial Board from 1985 to 1990 and on the Council from 1995 to 2000. All those who knew her will be saddened at the loss both for her warm and outgoing personality as well as for her professional abilities.