DIVIDING GOVERNMENT PRODUCT BETWEEN INTERMEDIATE AND FINAL USES

• Published in: The Review of income and wealth 1982-09, Vol.28 (3), p.325-344
• Main Authors: Horz, K., Reich, U.P.
• Format: Article
• Language: English
• ISSN: 0034-6586; 1475-4991
• DOI: 10.1111/j.1475-4991.1982.tb00620.x

This paper explores the possibility of using the Classification of the Functions of Government published recently by the United Nations (COFOG) in order to segregate intermediate from final use of government production in the national accounts. It is argued that the notorious difficulties of doing that can be traced to two reasons, one the multiplicity of theoretical concepts, and the other the lack of sufficient detail at the statistical level. The first can be removed by clarifying that on the production account of an economy only production and not welfare is to be measured. The second seems to be overcome by the three‐digit detail of COFOG. It is shown that many of these categories are now sufficiently homogeneous for a panel of experts to agree in assigning them to either intermediate or final use, although for a number of categories this is still difficult. The question is whether consensus in the major categories is large enough to consider the remaining controversial ones as border cases, normal in any classification and solved in the last instance not by argument but by convention. Some preliminary figures for the intermediate part of government production are given.