Fuller measures of output, input and productivity in the non-profit sector: a proof of concept

The National Accounting framework recognises a number of institutional sectors, based on the way in which economic units are organised and funded. One such sector is the Non-Profit Institutions Serving Households (NPISH) sector. In the UK, NPISH comprises most higher education establishments, charities, and a range of other non-profit bodies. Like the government sector, the output of the NPISH sector cannot be measured by market transactions, since there are not economically meaningful prices. Thus, productivity cannot easily be measured either. This has been partially overcome for the public sector based on recommendations in the Atkinson Review, but little attention has been paid to similar challenges measuring the output of the NPISH sector.

We explore the appropriate conceptual framework for thinking about non-profit output and productivity, and sketch a roadmap for measuring the productivity of the non-profit sector. Doing so requires us to go beyond the National Accounts, since some inputs to NPISH sector output (such as volunteer time) are outside the GDP boundary. Using a range of publicly available data we estimate new input and output measures for the non-profit sector, and from these estimate productivity levels and growth. We find that the NPISH sector in the UK has grown rapidly over the past 20 years, with hours worked and nominal GVA growing faster than for the economy as a whole. Our fuller measures suggest NPISH accounts for about 4.4% of GDP in 2019, compared with 2.9% before conceptual adjustments, and up from 3.3% two decades before.

The NPISH sector is less productive than the UK average, although similar to other labour-intensive industries like retail. We estimate little growth in real productivity, although price measurement in the relevant industries is difficult, so there is considerable uncertainty around our estimates of real GVA and productivity growth. There are also conceptual and practical difficulties in measuring the value of a sector that is likely to exhibit significant positive externalities, such that our adjusted measures still undervalue the sector.

• A blog on this paper written by Josh Martin, Improving our Understanding of the Non-profit Sector,  can be read on the ESCoE website
• The views reflected in the paper are solely those of the authors and cannot be taken to represent those of their respective employers.

Authors Josh Martin (Bank of England), Jon Franklin (Pro Bono Economics)