Evaluating impacts on essential inputs
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Scope
Does the option affect the cost or availability of essential inputs (raw materials, machinery, labour, energy, etc.)?[1]
Definition
This key question attempts to capture the main aspects of the availability and cost of production factors, which latu sensu include labour, land, fixed capital (plant, machinery, equipment, building), raw materials (also including semi-finished products and components) and energy but also the "social capital" represented by human capital and by institutional, natural, infrastructural and cultural resources. When we refer to labour as a factor of production, we usually consider the number of workers, the number of hours worked and the level of skills embodied in employees. Fixed capital is another factor of production, and refers to goods which will be used in production for more than one year. Examples of physical capital are plants where production is carried out, buildings where offices are located, and all kinds of machinery and equipment used in production. Complementary to fixed capital are infrastructures, which typically serve more than one plant and often are the result of public investments. Infrastructure involves ICTs (such as computer hardware and software or communication networks), transport (such as railroads, motorways and airports), education and training (such as schools and universities), research (such as research centres). Countries endowed with larger amount of factors of production can achieve higher levels of total income and a growth in these factors can lead to income growth.[1]
One reason why price can be higher or grow faster in certain countries has to do with the relative weight or dynamics of prices of inputs. To the extent that firms in different countries (or regions) sustain different costs for the production factors they use, they need to charge higher prices, unless they can use their inputs more productively, i.e. obtain relatively more product with a given amount of factors of production. Factors of production which more significantly affect prices are labour, energy and raw materials, capital and management. Labour affects price determination mainly through wages and overall labour costs. Wage differentials across gender, age, labour categories and regions can also explain differences in prices of final goods across countries and regions. Energy and raw materials affect price determination through the cost of imports, for those goods or services acquired outside the EU, and through production cost, for EU produced goods and services. Capital costs can either refer to credit capital or to equity capital. The former affects prices via interest rates, which determine the costs paid for its services, i.e. the burden of paid interests. The latter affects prices through the remuneration of services supplied by stockholders and by managers which usually take the form of profits.[1]
Result
Further information
EC related information:
Other information:
Indicators:
The following Eurostat Structural Indicators (General Economic Background and Employment) are relevant to address the key question:
- Unit labour cost growth
- Tax rate on low wage earners[1]
The following Eurostat Long-term Indicators (Energy) are relevant to address the key question:
- Electricity prices by type of user
- Gas prices by type of user
Relevant data is also available in the OECD statistics database under the headings:
- Energy
- Labour
- Demography and Population for what concerns Migration Statistics[1]
See also
References
This text is for information only and is not designed to interpret or replace any reference documents.