C HAP TER 1: E stim atin g th e We alth o f Nations
information about the composition of produced capital for a larger number of countries, (1) allowing us to provide more accurate estimates of the lifetime and depreciation of produced capital and (2) filling critical data gaps to provide a longer time series for a larger number of countries than in the past. The Penn World Table follows the general guidance for national accounts regarding the lifetime of each type of produced capital asset. The lifetime for structures is 50 years, and varies between 5 and 8 years for other categories of produced capital. This is a major departure from the 25-year cap on the lifetime applied to every asset in the previous work on wealth accounts. The team also does additional gap-filling for a few countries using the approach from the 2006 and 2011 reports. • Natural capital: Scoping studies to improve the benchmark data were conducted for subsoil assets, forest assets, and agricultural land. Recommended changes that were implemented include the following: • Subsoil assets: The actual lifetime of reserves is used rather than the previous cap of 25 years for all energy and mineral resources. We use data obtained from commercial databases (Rystad Energy, Wood Mackenzie) for production, country-specific prices, regional rental rates, and proven reserves to develop new, more accurate country-specific resource rent estimates for oil, gas, and coal. • Agricultural land: We use the FAO’s producer price to value output (rather than its export unit values, used in earlier estimates) and continue to rely on the FAO for production data. We use new regional land rental rates for both crops and pastureland. We also remove the 25-year cap on the time horizon. The agricultural land values indirectly affect the value of protected areas, which is estimated as the opportunity cost of the lowest-value agricultural land in a country. • Forest: Given the continued reliance on the FAO’s export unit value for timber prices, the regional rental rates have been revised to account for the price differential between domestically consumed versus exported timber. For nontimber forest products and services, the 1995 per hectare estimates are replaced with updated values derived from a meta data analysis that includes nontimber forest products, hunting and fishing, recreation, and water services. The 25-year cap on the time horizon is also removed. • Human capital: Human capital in the past was not measured explicitly but included as part of the “residual,” accounting for 50–85 percent of total wealth in past estimates. We apply the well-known JorgensonFraumeni lifetime earnings approach to measuring human capital globally. We use a unique database developed by the World Bank, the International Income Distribution Database, which contains more than 1,500 household surveys. • Net foreign assets: This data set is compiled by the Research Department of the IMF and is used for the wealth accounts without any changes.
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