Estimation of GDP
from the expenditure side
Workshop on National Accounts for Asian
Member States of the Organization of Islamic
Conference
Ankara, 1-2 December 2008
UN Statistics Division
Expenditure components of GDP
Lecture outline:
For each expenditure category
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Scope
Specific issues
Measurement
Data sources
Expenditure components of GDP
 Household final consumption
 Government final consumption
 Changes in inventories
 Gross fixed capital formation
 Acquisition less disposals of valuables
 Exports and imports
Expenditure components of GDP – Sectors involved
Household
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Government
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Corporations
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NPISH
Government final consumption
Gross fixed capital formation
Changes in inventories
Acquisition less disposals of valuables
Gross fixed capital formation
Changes in inventories
Acquisition less disposals of valuables
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Consumption NPISH
Gross fixed capital formation
Changes in inventories
Acquisition less disposals of valuables
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Imports and exports
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ROW
Household final consumption
Gross fixed capital formation
Changes in inventories
Acquisition less disposals of valuables
What is consumption?
Expenditure?
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through payment or through incurrence of a
liability
Monetary and non-monetary
(barter, own account)
some transfers in kind deemed transfers in
cash (e.g. international relief goods, social
transfers in kind)
Acquisition?
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Use?
Expenditure, plus
all other transfers in kind
Actual consumption:
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All acquisitions, plus (for households)
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Individual consumption of government and
NPISH
Accounting Rules
Valuation
Purchaser price:
The purchaser's price is the amount paid by
the purchaser, excluding any deductible VAT or
similar deductible tax, in order to take
delivery of a unit of a good or service at the
time and place required by the purchaser. The
purchaser's price of a good includes any
transport charges paid separately by the
purchaser to take delivery at the required
time and place.
Timing
Accrual
Household final consumption
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Scope:
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Purchase of goods and services
Own account production of goods
Owner occupied dwellings
Services produced by paid domestic staff
Compensation of employees in kind
Expenditures on financial intermediation services
Services insurance and pension funds
Certain licenses and fees
Household final consumption
Household as consumer
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Each household is a consumer
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Some households are also producers
• Households with an unincorporated enterprise
• Household that live in their own home (owner
occupied dwellings)
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Expenditures on goods and services by
households as producers are either
intermediate consumption or fixed capital
formation
Household final consumption
Residency
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Household final consumption expenditure
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Some households are also producers
• Includes: expenditures of residents abroad
• Excludes: expenditures of non-residents
Specific issues
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Free services provided by employer
Goods produced by household for own consumption
Purchase of services from other household
Distinction between wages in kind and intermediate
consumption by employers
Household final consumption
Data sources:
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Household budget surveys
Retail trade statistics
Administrative data
Production data
Foreign trade data (cif to purchaser price)
Compilation methods
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Direct observations
Benchmark to indicator method
Commodity flow method
Household final consumption
Validation of estimates:
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Growth rates
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Correlation with development in disposable
income, wages and salaries
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Comparison of implicit deflator with CPI
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Development of saving ratio
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Comparison of composition of consumption
over time
Government final consumption
Scope:
Government agencies (usually defined by law)
Plus
NPIs mainly controlled and financed by government
units
What does government produce?
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Non-market output
• General administration
• Specific services for general population (e.g. foreign policy)
• Individual services (e.g. education and health services)
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Market output (usually small)
Government final consumption
How is the Government output measured?
Non-market producer in general
output valuation on cost basis
Thus the output is the sum of
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Compensation of employees
Intermediate consumption
Consumption of fixed capital
Other taxes on production
Government final consumption
Who uses government non-market output?
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Expenditure approach: Government
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Actual consumption:
• General administration and services for the
population as a whole
Government
• Individual government services
Household
Government final consumption
Measurement
Government final consumption
= Total output
- Goods and services sold on the market
+ Goods and services purchased to be provided free to the
population
Valuation
No product taxes on government output
Thus for government;
Consumption equals non-market output
Government final consumption
Estimation
Most common sources
Government accounts
Main estimation process
 Adjustment for time of recording
 Reclassifications
 Competing coverage
(e.g. local government, extra budgetary units)
Consumption of NPISHs
What are non-profit institutions serving households
NPIS are legal or social entities
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Created for the purpose of producing goods and services
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Can not be a source of income, profit or gains for the
units that establish, control or finance them.
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Articles of association prevents sharing benefits by
owners of NPIs
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Serving households
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Examples:
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Cultural institutions
Philanthropic Institutions
Religious Institutions
Charitable Institutions
Political parties
Sports clubs
Other recreational organizations
Consumption of NPISHs
What do NPISHs produce?
Generally: Goods and services provided for free
to households
Possibly: Small scale market Goods and services
Examples of Goods and services provided for free
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Charity (e.g. free food for the poor)
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Religious events and counseling political representation
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Meeting facilities
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Consumer support
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Health services
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Vocational training
Consumption of NPISHs
How is the NPISHs output measured?
Non-market producer in general
output valuation on cost basis
Thus the output is the sum of
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Compensation of employees
Intermediate consumption
Consumption of fixed capital
Other taxes on production
Consumption of NPISHs
Who uses non-market output of NPISHs?
Expenditure approach: NPISHs themselve
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Actual consumption: Households
Measurement and valuation
Consumption NPISH = Total output - Output sold
General assumption in 1993 SNA: NPISHs do not pay taxes on
their output
Thus for NPISHs
Consumption equals Output (non-market)
Consumption of NPISHs
Data sources
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Census/surveys of NPISHs
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Household budget surveys
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Administrative records (e.g. umbrella
organizations)
Changes in inventories
Four types of inventories
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Finished goods
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Goods to be used in the production process
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Goods for resale
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Work-in-progress
(e.g. buildings under construction, crops in the field, livestock
for production while maturing, fruit trees while growing)
Changes in inventories
Valuation
Main concern: Avoiding including holding gains
and losses in the value of transactions
Thus:
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Goods:
• Additions to inventories: at prices prevailing at the time
of their entry
• Withdrawals from inventories: at prices prevailing at the
time of withdrawal
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Work-in-progress:
• Additions to inventories: at prices prevailing at the time
of their entry or costs plus mark up
• Withdrawals from inventories: at prices prevailing at the
time of withdrawal or costs plus mark up.
Changes in inventories
Data Sources
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Business surveys
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Administrative data on stocks held by
government entities
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Agricultural surveys
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Building permits
Capital Formation
What are they? Definition
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Usually goods but also services
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That are owned
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From which owner expects future
economic benefits over a period of time by
using it or holding it (asset boundary)
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That will be used for more than one year
Fixed Capital Formation
What are they? Scope
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They include
• New capital goods
• Existing capital goods
• Improvements to existing capital goods
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They can be
• Purchased
• Self-produced
Fixed Capital Formation – Main Types
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Fixed assets
• Dwellings
• Other buildings and structures including land improvements
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Machinery and equipment
• Transport equipment
• ICT equipment
• Other machinery and equipment
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Weapon systems
Cultivated biological resources
• Animal resources yielding repeat products.
• Tree, crop and plant resources yielding repeat products
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Costs of ownership transfer on non-produced assets
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Intellectual property products
• Research and development
• Mineral exploration and evaluation
• Computer software and databases
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Entertainment, literary or artistic originals
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Other intellectual property products
Fixed Capital Formation
Valuation
 Market prices
 Cost plus mark-up
 Discounted future benefits
Time of recording
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Change of ownership
When construction takes place under a
contract of sale agreed in advance the
ownership of the structure is effectively
transferred in stages as the work proceeds
Fixed Capital Formation
Data sources
 General
• Surveys and censuses users and producers
• Foreign trade statistics
Construction, machinery and equipment
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Survey of investors
Survey of construction company and other producers
Administrative data (e.g. building permits)
Foreign trade statistics
Livestock, timber etc.
• Agricultural censuses and surveys
• Administrative data
Valuables
What are they? Definition
Valuables are assets that:
• Are acquired as store of wealth
• Are not used up in production
• Do not deteriorate over time
Examples:
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Precious stones and metals
Antiques
Works of arts
Jewellery
Data sources:
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Household surveys
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Retail trade surveys
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Surveys and censuses of producers
Exports and Imports
Scope:
Besides general cases of imports and exports,
this also includes:
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Barter transaction
gifts
Shuttle trade
Goods for processing
Construction services
Installation services
Financial services
Trade and transport services
Transactions with extra territorial enclaves
Exports and Imports
Sources:
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Foreign trade statistics
Problems:
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Time of recording
Coverage
Currency denomination
Balance of payments statistics
Problems:
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Lack of details
coverage
Currency denomination
Thank You