Download Lesson 3 - Moodlerooms

Introduction to the System of
National Accounts (SNA)
Lesson 3
Production Boundary and Gross
Output
Copyright 2010, The World Bank Group. All Rights Reserved.
1
What is Production in the SNA?
1. Production of goods and services that are supplied
to units other than their producers: motor cars and
train rides.
2. Production of goods that are retained by the
producer for consumption or capital formation:
grow your own vegetables and build your own house
3. Own account production of “knowledge-capturing”
products that are retained by the producer for
consumption or gross capital formation: books, films
and music.
4. Production of housing services by owner occupiers:
living in your own house is production!
5. Production of domestic and personal services by
employing paid domestic staff: butlers and bodyguards.
Copyright 2010, The World Bank Group. All Rights Reserved.
2
What is output?
• In the Supply and Use Table we referred to
“domestic production”. The SNA prefers the
term “output”
• Output is measured as the value of goods and
services produced.
• This is not always the same as the value of
sales. The difference is the increase in stocks
of finished goods
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3
Output: some special cases
• For most kinds of activities it is easy to
identify the output. But the SNA has
some special rules:
1.
2.
3.
4.
5.
6.
Government
Non-profit institutions serving households
Trade
Banks
Insurance
Hidden and illegal output.
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4
1. Government
• In the national accounts, governments are regarded as
producing services which they sell to themselves.
• The problem here is “What is the value of these
services?”
• The SNA answer is that government output is equal to
the costs of producing them. These are:
–
–
–
–
–
Compensation of employees
Intermediate consumption
Consumption of fixed capital,
Net operating surplus
Taxes on production (less subsidies on production)
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5
2. Non-profit institutions serving
households
• These are usually referred to as NPISH (“enpish”)
and include:
–
–
–
–
–
Religious organizations
Political parties
Trade unions
Sporting and recreational clubs
Unicef, Red Crescent, Médécins sans frontière,
Handicap International.
• Their output is valued at cost – like government
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6
3. Trade
• The output of retail and wholesale
traders is not the value of the goods
they sell. It is their margin.
• The trade margin is the value of sales
minus the cost of goods purchased for
resale and plus the increase in stocks
of goods for resale.
• The increase in stocks may be + or Copyright 2010, The World Bank Group. All Rights Reserved.
7
4. Banks
• Banks make money in two ways:
– They sell services like changing foreign currencies or
transferring funds abroad
– They earn interest and property income by investing
their own funds and money that has been deposited
with them.
• Sometimes they pay interest on money deposited with them
but it is always much less than the property income they
earn from loans and other investments.
• Bank output is the value of services sold (usually
quite small) plus the difference between the
interest paid to depositors and the property
income earned from their investments (usually
very large).
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8
5. Insurance
• There are two kinds of insurance – life insurance and
accident insurance. Life insurance is an investment scheme
usually with the purpose of providing a pension. Here we
are only talking about accident insurance – vehicle, theft,
fire, travel, health and so on.
• The output of this kind of insurance is the “service charge”.
This is what you pay for the companies’ work in arranging
the insurance.
• This service charge has two components:
– The difference between the premiums they receive and the
claims they pay out; and
– The property income they earn by investing the funds they keep
in reserve to pay out claims (“contingency funds”)
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9
6. Hidden Output
• The SNA requires estimates of all activities within the
production boundary even if the producers try to
hide their activities and even if they are illegal.
• In practice, activities may be “hidden” from the
statistical office because their business registers are
out of date but in other cases the producers try to
hide what they are doing to avoid paying taxes.
• And some producers may complete statistical
questionnaires or tax forms but overstate their costs
or understate their receipts.
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10
Hidden Economy as % of GDP: West
Balkans 2005
Albania
Macedonia
Serbia
Brcko
Croatia
Bosnia Herzegovina
Srpska
Montenegro
0
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10
15
20
25
30
11
Illegal Activities
• The SNA production boundary includes illegal
activities where there are willing buyers and
sellers.
• Protection rackets (“Pay me 50 Dollars a month or
I will set fire to your kiosk”) are excluded because
the “protection” service is bought under duress.
• But production and sale of goods and services
which people buy freely are inside the production
boundary even if they are illegal.
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12
Size of Value Added of Illegal Activities in GDP: Some Official Estimates
Country
Bulgaria
Year of Estimate Value Added of Illegal Activities as
Percent of GDP
1998/1999
1.3
Czech Republic
2000
0.2
Hungary
2000
1.4
Latvia
2000
1.5
Lithuania
2002
0.9
Poland
2002
0.6
Serbia
2003
1.0
Sweden
2005
0.2
Ukraine
2005
2.2
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13
Data sources: Agriculture
• Periodic censuses of agriculture
• Annual surveys in some countries
• Crop marketing boards
• Agriculture ministry forecasts
• Household surveys
• Export and Import statistics
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14
Data sources: large enterprises
• Industry censuses every 5 or 10 years
• Annual surveys
• Company accounts
• Income tax statistics
• Exports
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15
Data Sources: Government and NPISH
• For government the data sources are the
budget documents for the coming year and
government accounts compiled after the end
of the year
• For NPISH, countries need to keep a register of
foreign and domestic NPISH. Foreign-based
NPISH generally keep good accounts.
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16
Data sources for small enterprises
• Household labor force surveys
• Informal sector 1-2 surveys
• Living Standards Measurement Surveys (LSMS)
• Area surveys
• Innovative methods
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17
Innovative methods
• Some examples
– Estimate total crop production from WHO data on
daily age-specific calorie requirements, calorific
content of major food crops and population statistics
– Estimate the earnings of unlicensed taxi drivers from
police statistics on prosecutions and information on
the average earnings of licensed taxis.
– Estimate the earnings of food sellers from the
numbers counted in a few main cities and the average
prices of the food sold.
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18
Key messages
• The SNA production boundary is wide. It covers hardto-measure activities as well as those carried out by
government and large enterprises.
• Regular data sources like government accounts,
enterprise and household surveys will provide much
of the information you need.
• But there will always be gaps that have to be filled by
innovative methods
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