Household Production and Consumption in Finland 2001

Consumption
Three types of consumption are distinguished in the household satellite account.
Firstly, there is final consumption, which means the actual using up of a product:
wearing clothes, eating food. Secondly, there is intermediate consumption, which
refers to use of the product as part of the production process. Thirdly,
consumption consists of the capital services produced by the appliances and
machines required in the production process, i.e. services offered by the means of
production in question throughout their service life. Capital services consist of
two items: consumption of fixed capital, i.e. depreciation of machinery and
equipment, and interest corresponding to the acquisition of capital. Only the
consumption of fixed capital is included in the Satellite Account. 3
For the purposes of the Satellite Account consumption of goods and
services (defined as final consumption in national accounts) were divided into
three groups: 1) those that are used directly to final consumption; 2) those that
are used as intermediate consumption goods in household production; and 3)
those that are used as capital goods in household production (durable and
semi-durable goods). The principles of product classification are set out in
Appendix 2 and a detailed classification by principal functions is presented in
Appendix 3.
Gross fixed capital formation and consumption
Household capital goods were defined as durables and semi-durable goods that
are used in household production. Calculations of capital consumption were
carried out by Statistics Finland using the Perpetual Inventory Method (PIM),
with an assumption that consumption is linear. Capital goods, the proportion
of these goods used in household production and their estimated service lives
are shown in table 3.
Estimates of service life are based on expert opinions (e.g. Work Efficiency
Institute TTS, 4 home appliance repair shops), estimates published in the
Eurostat methods report (Varjonen et al. 1999) as well as figures used in
German and UK satellite accounts. The service life for cars is based on average
scrap age according to Finnish Central Organisation for Motor Trades and
Repairs statistics in 2002.
3 In principle it might be possible to consider including interest payable on capital so that the
value of production calculated on a cost basis would correspond to the value of production
based on the output method. After all, any normal market operation is expected to produce
an operating surplus. This can be seen for instance by comparing the purchase of household
appliances and equipment with leasing and rental values: the sum total of all rental payments
exceeds the value of the appliances because whoever is renting them out will want to get
enough money to cover not only the value of the appliances and equipment, but also the
interest payable on capital; otherwise the operation will not make financial sense. However
interest payable on capital is excluded from the analysis here, first, because for the time being
the national accounts do not use it in the measurement of non-market production (although
discussions are currently underway on the possibility of revising SNA recommendations in this
respect) and, second, because the determination of the right interest rate is not
straightforward.
4 Rytkönen A, Reisbacka A (1995) Kotitalouskoneiden kestoikään vaikuttavat tekijät.
Työtehoseuran julkaisuja 341.
National Consumer Research Centre Statistics Finland 21