Budget Issues: GDP Analysis Broadens Budget Debate (Letter Report,
04/27/94, GAO/AIMD-94-41).

The gross domestic product (GDP) budgeting concept can be a useful tool
because it broadens the debate beyond federal revenue and spending
policies by including information on the allocation of total GDP.  In a
mixed economy, national goals are achieved both through federal tax or
spending programs and other policy options, such as regulation, and
through the actions of the state, local, and private sectors.  Federal
policy decisions affect the behavior of individuals, private entities,
and state and local governments. The country achieves its national
objectives through the use of all economic resources, not just those
allocated through the federal budget process.  Considering all economic
sectors when developing federal taxing and spending policies could help
budget decisionmakers better achieve desired economic outcomes.
Although international comparisons can improve policy decisionmaking,
there are limits to the data.  Data for these type of comparisons are
not always readily available, and it can be hard to achieve
comparability because of socioeconomic or demographic factors. More
important, data on resources allocated to economic sectors do not
necessarily reflect the outcomes that are received.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  AIMD-94-41
     TITLE:  Budget Issues: GDP Analysis Broadens Budget Debate
      DATE:  04/27/94
   SUBJECT:  Fiscal policies
             Budget administration
             Future budget projections
             Economic policies
             National policies
             Economic analysis
             Gross National Product
             Economic research
             Budgeting
IDENTIFIER:  Canada
             France
             Germany
             Italy
             Japan
             United Kingdom
             Sweden
             Australia
             
**************************************************************************
* This file contains an ASCII representation of the text of a GAO        *
* report.  Delineations within the text indicating chapter titles,       *
* headings, and bullets are preserved.  Major divisions and subdivisions *
* of the text, such as Chapters, Sections, and Appendixes, are           *
* identified by double and single lines.  The numbers on the right end   *
* of these lines indicate the position of each of the subsections in the *
* document outline.  These numbers do NOT correspond with the page       *
* numbers of the printed product.                                        *
*                                                                        *
* No attempt has been made to display graphic images, although figure    *
* captions are reproduced. Tables are included, but may not resemble     *
* those in the printed version.                                          *
*                                                                        *
* A printed copy of this report may be obtained from the GAO Document    *
* Distribution Facility by calling (202) 512-6000, by faxing your        *
* request to (301) 258-4066, or by writing to P.O. Box 6015,             *
* Gaithersburg, MD 20884-6015. We are unable to accept electronic orders *
* for printed documents at this time.                                    *
**************************************************************************


Cover
================================================================ COVER


Report to the Chairman, Committee on the Budget, U.S.  Senate

April 1994

BUDGET ISSUES - GDP ANALYSIS
BROADENS BUDGET DEBATE

GAO/AIMD-94-41

GDP Budgeting


Abbreviations
=============================================================== ABBREV

  GDP - gross domestic product
  GNP - gross national product
  ISCED - International Standard Classification of Education
  OECD - Organization for Economic Cooperation and Development
  UNESCO - United Nations Educational, Scientific, and Cultural
     Organization

Letter
=============================================================== LETTER


B-256563

April 27, 1994

The Honorable Jim Sasser
Chairman, Committee on the Budget
United States Senate

Dear Mr.  Chairman: 

Based on your request and discussions with your office, this letter
summarizes the concept of gross domestic product (GDP) budgeting and
provides comparative information on gross fixed capital formation
(physical capital excluding inventories), health care consumption,
and education consumption in the United States and comparable
countries to illustrate both the utility and the potential
shortcomings of such an approach.  Gross domestic product is the
value of goods and services produced within the United States, and
differs only slightly from gross national product (GNP), the value of
goods and services produced by residents of the United States. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

The GDP budgeting concept can be a useful tool because it broadens
the debate beyond federal revenue and spending policies by including
information on the allocation of total GDP.  In a mixed economy,
national goals are achieved both through federal tax or spending
programs and other policy actions, such as regulation, and through
the action of the state, local, and private sectors.  Federal policy
decisions affect the behavior of individuals, private entities, and
state and local governments.  The country achieves its national
objectives through the use of all economic resources, not just those
allocated through the federal budget process.  Considering all
sectors of the economy when developing federal taxing and spending
policies could help budget decisionmakers better achieve desired
economic outcomes. 

Although international comparisons can improve policy decisionmaking,
there are certain limitations to the data.  Data for these type of
comparisons are not always readily available, and it can be difficult
to achieve comparability because of socioeconomic or demographic
factors.  More important, data on resources allocated to sectors of
the economy do not necessarily reflect the outcomes that are
received. 


   BACKGROUND
------------------------------------------------------------ Letter :2

Economist Herbert Stein has written extensively on national resource
allocation, which he calls "budgeting the GNP."\1 Dr.  Stein has
argued that focusing solely on federal revenues and spending is too
narrow.  Instead, he suggests that the first step in federal
budgeting should be to consider how national resources should be
allocated.  In his view, federal decisions on spending, taxing, and
regulation should then be pursued with an eye to supporting these
broad economic goals.  The U.S.  economy is a mix of both the public
and the private sectors.  Under Dr.  Stein's approach, the question
of who in this mixed economy--the federal government, state or local
government, or the private sector--should finance investment or
consumption in particular areas of the economy would be a separate
question. 

In thinking about how resources should be allocated in the U.S. 
economy, analysts and decisionmakers can use two types of analytical
comparisons.  One is to look at historical trends within the U.S. 
economy--a traditional approach typically used in assessing the
economy.  Another is to compare the allocations in the United States
to those of other nations.  Neither historical trends nor
international comparisons provide a "correct" answer.  Both, however,
can help raise questions for which the answers would advance the
debate and improve policy decisions.  As evidenced by the debate
surrounding health care, other countries can provide interesting
insights into policy debate.  Comparing historical trends in the
composition of the U.S.  economy to those of other industrial
economies can help provide a context for assessing the current
allocation of U.S.  economic resources. 

The Final Report of the House Members of the Joint Committee on the
Organization of the Congress recommended that the Council of Economic
Advisers be required to include a GNP analysis, similar to that
advocated by Dr.  Stein, in the Economic Report of the President.  In
testimony\2 before the Subcommittee on the Legislative Process, House
Committee on Rules, we stated that if the Congress chooses to adopt
this provision, we would suggest one technical but important
change--that the requirement be for a GDP analysis rather than a GNP
analysis.  This would be consistent with the fact that in 1991 the
United States joined the rest of the industrialized world in shifting
its focus from GNP to GDP.  Since other industrialized nations use
GDP data, international comparisons will be easier if our national
resources budgeting effort also uses GDP. 


--------------------
\1 Herbert Stein, Governing the $5 Trillion Economy (New York: 
Oxford University Press, 1989). 

\2 Budget Process:  Some Reforms Offer Promise (GAO/T-AIMD-94-86,
March 2, 1994). 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :3

In comparing countries, we used data collected by the Organization
for Economic Cooperation and Development (OECD) primarily for the
period 1970 through 1989 for the members of the G-7 (Canada, France,
Germany, Italy, Japan, the United Kingdom, and the United States) as
well as for Sweden and Australia.  We did not audit OECD data.  The
majority of the comparisons represent the use of resources as a
percentage of each country's GDP.  In those cases where comparisons
were made in U.S.  dollars, values in the other countries' currencies
were converted by using purchasing power parities, an accepted rate
of currency conversion that attempts to eliminate the differences in
price levels between countries.  To illustrate more clearly the
differences among nations' economic choices, we also calculated an
index which shows the average percentage of GDP all the nine
countries devote to particular sectors and compared each nation's
allocation to that average. 

As you requested, we have provided additional source information on
the data used including definitions.  (See appendix I.) Appendix II
provides, among other data, the cross-nation comparisons for gross
fixed capital formation, health care consumption, and education
consumption.  Appendix III presents the nine countries' economic
allocations in 1990 or the most recent year for which data were
available, and appendix IV provides the additional information you
requested on education. 


   UNITED STATES RANKED LOWEST IN
   GROSS FIXED CAPITAL FORMATION
------------------------------------------------------------ Letter :4

As our analysis of the data shows, the United States in 1970 and 1989
ranked last among the nine countries in gross fixed capital formation
as a share of GDP.  Although the relative ranking of countries can
change and trends can increase or decrease from year to year, of the
nine, only Canada and the United Kingdom had a net increase in their
share of GDP devoted to investment in physical capital between 1970
and 1989.  Comparing each of the nine nations to the group's average
share of GDP devoted to this sector showed large differences between
countries.  At one end, Japan is almost 50 percent above the average;
while the United States, at the other end, is approximately 20
percent below the average. 

These comparisons should not be read as suggesting that the United
States must invest at the rate reported in other industrial nations. 
Both differences in business cycles--which have not been factored
into this work--and differences in national priorities may account
for allocation differences.  However, the fact that gross fixed
capital formation in the United States is declining as a percent of
GDP when the United States already occupies the last position among
its chief competitors, at a minimum, suggests the need to think about
this question and to reexamine public policies involving capital
formation, as well as other forms of investment.  Long-term economic
growth, a central concern to the nation, depends on many things, but
private and public investment in infrastructure, human capital, and
technology are essential.  Without improved productivity and
increased growth, the nation cannot continue to expect an
ever-improving standard of living for future generations. 


   UNITED STATES RANKS HIGHEST IN
   HEALTH CARE CONSUMPTION
------------------------------------------------------------ Letter :5

Health care consumption presents a sharp contrast to the findings
about gross fixed capital formation:  health care consumption in the
United States has grown dramatically as a percentage of GDP.  In
1970, the United States was virtually tied with Canada as the economy
with the highest percentage of resources devoted to health care.  By
1987, the most recent year for which data are available for all nine
countries, the United States had surged past Canada and still
remained well ahead of the other nations.  Throughout the 1980s,
France and Sweden also devoted a rapidly growing share of their
resources to health care, but both remain well below levels reported
in the United States. 

As might be expected from these trends, the United States is more
than 20 percent above the nine-nation average for percentage of GDP
spent on health care.  The United Kingdom, the lowest of the nine, is
37 percent below the average. 

These comparisons should not be read as suggesting that the United
States should spend the same proportion of GDP on health care as
other nations.  However, we and other organizations have raised
concerns over whether the United States is receiving health care
commensurate with the resources spent and whether the increased
spending on health care is affordable in an environment of limited
resources and competing social demands.  In our December 1992
Transition Series report, Health Care Reform, we pointed out that the
inexorable rise in health care costs is constraining the financial
capability of federal and state governments to address other pressing
social concerns.  In a 1992 study, Economic Implications of Rising
Health Care Costs, the Congressional Budget Office found that there
are strong reasons to believe that, in the United States, the
marginal costs of health care often exceed the value of the marginal
benefits received.  Most recently, the 1994 Economic Report of the
President points out that the U.S.  health care system is far from
efficient, stressing the inconsistency between the greater resources
spent on health care as a percent of GDP in the United States and
lower life expectancies relative to other countries.  The Economic
Report of the President also stresses the danger that escalating
health care costs will continue to confront federal, state, and local
governments with painful choices among increased taxes, cuts in other
programs, or increases in the deficit. 

Since the elderly tend to consume a greater share of medical care
than younger people, we also looked at one demographic factor that
may explain why health care consumption is much higher as a share of
GDP in the United States than in other countries--the proportion of
elderly residents in each country.  Since the United States spends a
greater share of GDP on health care than other countries, one might
expect that the United States would also have the highest proportion
of elderly in its population.  However, the United States ranks sixth
among the nine in proportion of elderly citizens, while the United
Kingdom, which uses the lowest percentage of GDP for health care
among the nine, has the second highest proportion of elderly
citizens.  This suggests that other elements may be equally or more
important in driving health care spending. 


   UNITED STATES RANKS HIGH IN
   EDUCATION CONSUMPTION
------------------------------------------------------------ Letter :6

The United States ranked second among seven nations\3 in both 1970
and 1987 in resources devoted to education although the differences
between the various countries is generally small.  Only Canada is
higher, and the United States is gaining.  When viewed in terms of
spending per person in the age group 2-29, the United States leads
even Canada.  In addition, the U.S.  allocation of GDP for education
for all age groups grew slightly during this period. 

In light of publicly expressed concern regarding the effectiveness of
the U.S.  educational system and its perceived underfunding, the U.S. 
position near the top of the seven countries may be unexpected.  This
ranking may be due in part to the difficulty of collecting data on
education from these countries.  The lack of complete data on
privately financed training and apprenticeship programs may make
other countries appear to spend less than they do.  Moreover, any
aggregated data obscure regional variations, which may be greater in
countries with federal structures, such as the United States.  In
addition, variance in education spending across countries can reflect
differences in the value given to particular elements, such as
special or postsecondary education.  However, these national
comparisons still raise the question of whether the United States, as
it considers increasing the level of funding for education, should
look more closely at the effectiveness of current resource use. 

Because you expressed particular interest in more information on
education, appendix IV provides additional comparisons.  The data
set, obtained from Education at a Glance, a 1992 report by the OECD,
is relatively new and therefore cannot be used to show trends; it can
provide comparative data on education spending for 1988 only.  It is
noteworthy that in these data, the United States continues to devote
higher levels of resources to education than most of the comparison
countries. 


--------------------
\3 Comparable data were unavailable for Japan and Germany. 


   CONCLUSIONS
------------------------------------------------------------ Letter :7

Examining U.S.  economic data in the GDP budgeting context and using
international comparisons can provide an improved sense of relative
U.S.  priorities and may help focus budget policy debate.  Although
this framework is limited, the concept can focus budget debate on the
allocation of total GDP, not just that part which is controlled
directly by the federal sector. 

Budgeting the GDP also involves much more than assessing U.S. 
economic trends as compared with those of other industrial countries. 
Implementing such a budgeting approach would involve a more detailed
understanding of the underpinnings of these economic allocations than
this aggregate level of data can provide; more needs to be known
about the impact of changes in federal spending as well as tax and
regulatory policies on the allocation of national economic output. 
Moreover, such analyses need to take into account the distributional
consequences of such allocations across various income groups in
society.  Such an approach would provide greater awareness of the
consequences of changing the allocation devoted to one economic
sector on the others. 

This type of data does not capture the results attained for the
resources that have been allocated.  It can, however, both provide a
context for assessing trends in the United States and raise
questions, the answers to which could help better target federal
policies for constructive economic results.  For example, the current
debate over health care reform has brought such comparisons to public
attention and allowed the debate to focus not solely on federal costs
but on the total cost of health care to the economy. 

We look forward to working with you and your office on these issues
in the future.  If you wish to discuss this information further,
please contact me at (202) 512-9573.  Major contributors to this
report are listed in appendix V. 

Sincerely yours,

Paul L.  Posner
Director, Budget Issues


SOURCES AND DEFINITIONS
=========================================================== Appendix I

SOURCES

The data in the figures in appendix II are from the Organization for
Economic Cooperation and Development (OECD) National Accounts, Volume
2:  Detailed Historic Tables.  The classifications are organized
according to the System of National Accounts used by the OECD and the
United Nations.  All percentages in the pie charts have been rounded
to the nearest percentage point.  The data in appendix IV are from
the 1992 OECD publication Education at a Glance. 

DEFINITIONS

The OECD defines the components of gross domestic product (GDP) as
follows: 

Total final consumption expenditure.  This represents government
final consumption expenditure and private final consumption
expenditure.  Government final consumption expenditure is the value
of goods and services produced by governments for their own use less
the value of sales and the value of capital formation.  Private final
consumption expenditure is the outlays of resident households for new
durable and nondurable goods and services less sales of secondhand
goods, scraps, and waste.  It also includes the value of goods and
services produced by private nonprofit institutions for their own
use.  The sections listed below are components of total final
consumption expenditure. 

Defense.  This is the defense component of total consumption
expenditure.  It is entirely made up of public sector expenditure. 
It represents military and civil defense administration and
operation, foreign military aid, defense-related applied research and
experimental development, and defense affairs.  It includes durable
(capital) goods for military use. 

Education.  The breakdown of education data is based largely on the
categories of the International Standard Classification of Education
(ISCED) of the United Nations Educational, Scientific, and Cultural
Organization (UNESCO).  ISCED defines education as organized and
sustained communication to bring about learning.  It may be conducted
within or outside an official school system or institutional
arrangement.  ISCED covers education for all types of students and
for all age groups, including adults.  Education includes activities
that in some countries and in some languages may be described as
"training" or "cultural development." It excludes types of
communication that are not designed to bring about learning or are
not planned in a pattern or sequence with established aims, for
example, leisure-time activities.  It excludes capital formation,
such as new school buildings. 

In OECD calculations, apprenticeship programs are classified as
belonging to formal education.  Such programs typically involve
alternating between educational institution learning (ordinary or
specialized) and learning through work experience programs, which may
include highly organized training in a firm or with a craftsperson. 
There must be a legal arrangement between the apprentice and the firm
or craftsperson.  Apprenticeship programs are considered
technical/vocational education. 

Health care.  Health care consumption includes expenditures for
hospital affairs and services; clinics; medical, dental, and
paramedical practitioners; public health affairs and services;
medicaments, prostheses, medical equipment and appliances or other
prescribed health-related products; and applied research and
experimental development related to health and medical delivery
systems.  Hospital affairs includes general and specialized
hospitals, medical and maternity centers, and nursing and
convalescent home services.  Public health affairs and services
include administration, management, and so forth of items such as
blood banks, population control services, and disease detection
services.  It excludes capital formation, such as new hospital
buildings. 

Transportation/communication.  Transportation and communication
consumption includes road transport, water transport, railway
construction, air transport, pipeline transport, other transport
system affairs and services, and communication affairs and services. 
It excludes capital formation (except for railway construction), such
as new roads.  The U.S.  reliance on road systems and other
countries' reliance on railway systems would be a factor to consider
when viewing this category for comparison purposes. 

Other consumption.  This is a residual figure.  Total consumption
expenditure minus the just mentioned categories equals "other." On
the public sector side, it includes general public services; public
order and safety affairs; social security and welfare affairs and
services; housing and community amenity affairs and services;
recreational, cultural, and religious affairs and services; fuel and
energy affairs and services; agriculture, forestry, fishing and
hunting affairs, and services; mining and mineral resources affairs
and services; manufacturing affairs and services; construction
affairs and services; and other economic affairs and services.  On
the private sector side, it includes food, beverages, and tobacco;
clothing and footwear; rent, fuel, and power; furniture, furnishings,
and household equipment and operation; recreation, entertainment, and
cultural services; miscellaneous goods and services; and consumption
of private nonprofit institutions serving households. 

The items listed below are not part of total final consumption
expenditure, but represent the rest of the economy, or GDP. 

Increase in stocks.  The market value of the physical change in
stocks of materials, supplies, work-in-progress (except on
construction projects), finished products, and livestock raised for
slaughter; in merchandise held by resident industries; and in stocks
of strategic materials and emergency stocks of important products
held by government.  It could be described as inventory investment. 

Gross fixed capital formation.  The outlays of industries, producers
of government services, and producers of private non-profit services
to households for additions of new durable goods to their stocks of
fixed assets less the net sales of similar secondhand or scrap goods. 
Excluded are the outlays of government on durable goods for military
use. 

Net exports.  The net transfers of the ownership of goods and
services provided between residents of a country and nonresidents. 


CROSS-NATIONAL COMPARISONS
========================================================== Appendix II

   Figure II.1:  Composition of
   U.S.  Economy, 1990 (Percent of
   GDP )

   (See figure in printed
   edition.)

Note:  All other includes consumption and net exports (85.49 and
-1.48 percent of GDP, respectively). 

   Figure II.2:  Shifts in the
   Composition of the U.S. 
   Economy Between 1970 and 1989

   (See figure in printed
   edition.)

Note:  Other includes other areas of consumption and inventory
investment. 

   Figure II.3:  Gross Fixed
   Capital Formation, 1970 and
   1989

   (See figure in printed
   edition.)

   Figure II.4:  Index of
   Country's Capital Formation
   Relative to the Average Share,
   1989

   (See figure in printed
   edition.)

Note:  The values represent the amount above or below the average
that all countries devoted to capital as a percent of their total
GDP.  A value of zero means that a country's share of GDP devoted to
capital equals the average of all the countries. 

   Figure II.5:  U.S.  Health Care
   Consumption

   (See figure in printed
   edition.)

   Figure II.6:  U.S.  Health
   Expenditures and Projections,
   1980-2000

   (See figure in printed
   edition.)

Source:  Congressional Budget Office Projections. 

   Figure II.7:  Health Care
   Consumption by Country

   (See figure in printed
   edition.)

Note:  Data for the United Kingdom begin in 1978, France in 1975, and
Australia in 1973.  Data for Sweden for 1970 represents public sector
only. 

   Figure II.8:  Index of Health
   Care Consumption Relative to
   the Average Share, 1987

   (See figure in printed
   edition.)

Note:  The values represent the amount above or below the average
that all countries devoted to health care as a percent of their total
GDP.  A value of zero means that a country's share of GDP devoted to
health care equals the average of all the countries. 

   Figure II.9:  Percent of the
   Population 65 Years or Older,
   1987

   (See figure in printed
   edition.)

   Figure II.10:  Education
   Consumption

   (See figure in printed
   edition.)

Note:  Data for the United Kingdom begins in 1978, France in 1975,
Australia in 1973.  Trend data on total education expenditure is not
available for Japan and Germany. 

   Figure II.11:  Education
   Consumption, Per Capita for
   Ages 2-29, 1987

   (See figure in printed
   edition.)

   Figure II.12:  Index for
   Education Consumption Relative
   to the Average Share, 1987

   (See figure in printed
   edition.)

Note:  The values represent the amount above or below the average
that all countries devoted to education as a percent of their total
GDP.  A value of zero means that a country's share of GDP devoted to
education equals the average of all the countries. 


NATIONAL ECONOMIC ALLOCATIONS
========================================================= Appendix III



                                             Table III.1
                               
                                Economic Allocations Across Countries
                               (1990 or most recent year for which data
                                    are available, percent of GDP)


                                               Transportat
                              Non-                    ion/                               Other
                         residenti  Residenti  communicati  Healt  Defens  Educatio  consumpti  Othe
Country            Year         al         al           on      h       e         n         on     r
---------------  ------  ---------  ---------  -----------  -----  ------  --------  ---------  ----
Australia          1990         17          5           10      8       2         5         54     0
Canada             1987         14          7           11      8       2         6         50     1
France             1988         15          5           11      8       3         5         51     1
Germany            1989         15          5            9      8       2         4         50     6
Italy              1990         15          5            8      7       2         5         57     1
Japan              1990         26          6            6      6       1         3         50     1
Sweden             1989         16          5           10      8       2         5         53     1
U.K.               1990         16          3           11      6       4         4         58    -2
U.S.               1989         12          4           11     11       6         6         50    -1
----------------------------------------------------------------------------------------------------
Note:  Figures may not add to 100 percent due to rounding.  Other
represents inventory investment, net exports, and statistical
discrepancy.  This table summarizes data in the following pie charts. 

   Figure III.1:  Economy of
   Australia, 1990 (Percent of
   GDP)

   (See figure in printed
   edition.)

Note:  "Other" is largely "other consumption" (see appendix I), but
it also includes small amounts of inventory investment, net exports,
and any statistical discrepancies. 

   Figure III.2:  Economy of
   Canada, 1987 (Percent of GDP)

   (See figure in printed
   edition.)

Note:  "Other" is largely "other consumption" (see appendix I), but
it also includes small amounts of inventory investment, net exports,
and any statistical discrepancies. 

   Figure III.3:  Economy of
   France, 1988 (Percent of GDP)

   (See figure in printed
   edition.)

Note:  "Other" is largely "other consumption" (see appendix I), but
it also includes small amounts of inventory investment, net exports,
and any statistical discrepancies. 

   Figure III.4:  Economy of
   Germany, 1989 (Percent of GDP)

   (See figure in printed
   edition.)

Note:  "Other" is largely "other consumption" (see appendix I), but
it also includes small amounts of inventory investment, net exports,
and any statistical discrepancies. 

   Figure III.5:  Economy of
   Italy, 1990 (Percent of GDP)

   (See figure in printed
   edition.)

Note:  "Other" is largely "other consumption" (see appendix I), but
it also includes small amounts of inventory investment, net exports,
and any statistical discrepancies. 

   Figure III.6:  Economy of
   Japan, 1990 (Percent of GDP)

   (See figure in printed
   edition.)

Note:  "Other" is largely "other consumption" (see appendix I), but
it also includes small amounts of inventory investment, net exports,
and any statistical discrepancies. 

   Figure III.7:  Economy of
   Sweden, 1989 (Percent of GDP)

   (See figure in printed
   edition.)

Note:  "Other" is largely "other consumption" (see appendix I), but
it also includes small amounts of inventory investment, net exports,
and any statistical discrepancies. 

   Figure III.8:  Economy of the
   United Kingdom, 1990 (Percent
   of GDP)

   (See figure in printed
   edition.)

Note:  "Other" is largely "other consumption" (see appendix I), but
it also includes small amounts of inventory investment, net exports,
and any statistical discrepancies. 

   Figure III.9:  Economy of the
   United States, 1989 (Percent of
   GDP)

   (See figure in printed
   edition.)

Note:  "Other" is largely "other consumption" (see appendix I), but
it also includes small amounts of inventory investment, net exports,
and any statistical discrepancies. 


EDUCATIONAL COMPARISONS
========================================================== Appendix IV

   Figure IV.1:  Shares of Public
   Expenditure on Education by
   School Level, 1988

   (See figure in printed
   edition.)

Note:  Some countries indicated that a significant portion of
education funding was "undistributed," or not allocated between
pre-primary, primary, and secondary education and higher education. 
Public expenditure includes both consumption and capital
expenditures.  Differences among countries in the shares allocated to
the different levels of education may reflect differences in the
duration of education at each level.  In Australia, expenditure for
higher education includes expenditure for vocational secondary
education, as it is taught in higher education institutions.  In
Sweden, preprimary data are estimated.  They include only expenditure
data for required programs for 6 year-olds, and do not cover programs
for younger children. 

   Figure IV.2:  Capital Formation
   Devoted to Education, 1988

   (See figure in printed
   edition.)

Note:  Capital in this case is defined as resources spent on items
that last for more than 1 year, such as school buildings and
equipment.  Capital expenditure data for Germany and the United
States include the repayment of loans.  The data for Japan include
private schools. 

   Figure IV.3:  Public
   Expenditure per Student by
   School Level, 1988

   (See figure in printed
   edition.)

Note:  Includes both consumption and capital expenditure.  In the
data for the United Kingdom, the estimated expenditure for nursing
and paramedical students is not included but the number of these
students has been counted.  Therefore, the cost per student at the
higher education level is underestimated.  For the United States,
higher education data refer to total expenditures by public
universities after transfers, including the tuition fees the
universities collected from their students. 


MAJOR CONTRIBUTORS TO THIS REPORT
=========================================================== Appendix V

ACCOUNTING AND INFORMATION
MANAGEMENT DIVISION, WASHINGTON,
D.C. 

Barbara Bovbjerg, Assistant Director
Maureen Berner, Evaluator-in-Charge

OFFICE OF THE CHIEF ECONOMIST

Pam Pavord, Computer Specialist

