Why are we where we are on this league table?

By Donal Curtin 07/02/2014

League tables are always fascinating, and I came across a rather suggestive one in the January 11 issue of the Economist, in an article, ‘Setting out the store’, which was making the case for governments to sell off more of their assets.
The Economist didn’t give the exact source for its cross-country comparisons (just citing “an IMF paper”) but I’ve tracked it down and here’s the data from the original source (Another Look at Governments’ Balance Sheets: The Role of Nonfinancial Assets). It shows the amount of government-owned (central and local government) non-financial assets (everything from land and sub-soil assets through buildings, roads, and infrastructure, through to non-tangibles like software and films), as a percent of GDP.

This is an area where cross-country comparisons (as the authors stress) are fraught, due to assorted and significant data problems, but even so I think it’s fair to ask why we seem to have a relatively high share of our resources tied up in state-owned non-financial assets.
The data we supply to the international statistical agencies don’t help a lot with the answer, as they aren’t split out into categories like dwellings or structures (which is why we are a grey bar in the chart above), so you can’t tell, for example, whether we have an unusually high stock of government-owned housing or an unusually large set of roads. The only split we provide is between central and local government, shown below compared with other countries that also provide the same split.

There’s clearly a big chunk of local authority assets in our total. That’s not unusual: as the authors note (p10), “On average, subnational governments hold more than one-half of total nonfinancial assets. The share of regional and local governments is particularly high in federal states”. 
But it does leave you wondering. To date, our privatizations – asset sales, whatever – have been at central government level. But you’d begin to wonder if local authorities aren’t similarly sitting on superfluous assets that could also be sold off.

0 Responses to “Why are we where we are on this league table?”

  • Hi Donal,

    Summer semester exam over, so a couple of weeks free to browse you guys blogs before serious pressure starts again!

    I guess one really interesting question posed by your post is, how do you define ‘superfluous’?

    Another could be, why is it that most countries on the chart above have both a lower level of government asset ownership and a higher per capita income than NZ?

    That’s definitely food for thought!

    Look forward to your response.

    • I can’t speak for Donal, but I’d say that any government SOE is superfluous if it is not most efficiently owned by government. You can make the case for government ownership of a few specific types of firms: it’s a plausible alternative to having a heavily regulated monopoly power lines company, for example. On this kind of question, read Andrei Shleifer’s excellent “State versus Private Ownership” from the JEP a few years back.

      I don’t think we could draw any necessary relationship between our having relatively public ownership and relatively low incomes – I’d put lower incomes mostly down to small scale and distance, which mean we can’t get the benefits of agglomeration and everything has relatively high fixed cost.