Classification of public universities
Non-market output occurs when goods and services are provided free of charge, or at prices which are not economically significant. These are prices that have no significant effect on the amount that producers are willing to supply and the amounts purchasers wish to buy.4
The ABS examines each producing unit in the economy to determine whether it charges economically significant prices for its output. Units that predominantly charge prices that are not economically significant are classified as non-market producers.
Public universities are classified as non-market producers as they deliver services to domestic undergraduate students at prices which are not deemed to be economically significant and they engage in significant amounts of non-market public research activities.
As universities are entities under the control of State and Commonwealth governments, they are classified to the general government sector in macroeconomic statistics. More information on the institutional sector classification used in Australia can be found in Standard Economic Sector Classifications of Australia (ABS Cat. no. 1218.0).5
Private universities are considered to produce market output and are outside the scope of this paper, although improvements to measurement of this small sub-sector may also be considered in future work.
The indexes proposed in this paper relate to the public sector component of the Australian and New Zealand Standard Industrial Classification (ANZSIC) class 8102 – Higher Education.
Public schools (within ANZSIC group 802) and some vocational education and training institutions (ANZSIC class 8101) are also non-market producers. Therefore, the Education and Training industry (ANZSIC Division P) contains significant amounts of non-market output (in contrast to most industries in Australia, which contain only a small proportion of non-market production). This makes it hard to measure the productivity of this industry. As a result, the ABS currently excludes the Education and Training industry from published multifactor productivity statistics.
For further information about the conceptual framework which underpins the measurement of non-market output, please refer to "Non-market output measures in the Australian National Accounts: a conceptual framework for enhancements".6
4 https://unstats.un.org/unsd/nationalaccount/docs/SNA2008.pdf 2008 SNA, paragraph 4.18.