Agenda item 6d
United Nations Economic Commission for Europe
Statistical Division
Exhaustiveness of national accounts
Non-observed economy and Informal sector
Workshop on Implementation of the 2008 SNA
Kiev, 29 November - 2 December 2011
Presentation by UNECE
Objective and Definition
All activities within the SNA production
boundary should be included
Non-observed economy refers to all
productive activities that may not be captured
in the regular statistical enquiries, that is,
activities that are not directly observed.


•
•
23 July 2016
The aim is to make national accounts exhaustive (quality
aspects).
Statistics are impartial - from NA perspective not important
whether what is produced are “goods” or “bads”, whether
produced legally/illegally, by registered/unregistered
enterprises etc.
- UNECE Statistical Division
Slide 2
Exhaustive Measurement issues

Lack of coverage causes problems for users both in
terms of levels and trends

Levels
•
•
Trends

•

GDP and other data downward biased – inaccurate impression
of economy
Great significance in situations - monetary contributions
made/received by a country depend on its GDP or when poverty
is measured by GDP per head etc.
Biases in trend estimates can be expected if the economic
activities missing from GDP grow at different rates from those
included
For National Accountants, lack of coverage causes
imbalances in the internal consistency of the accounts
23 July 2016
- UNECE Statistical Division
Slide 3
Exhaustiveness in the 2008 SNA
It is not an issue only for developing countries,
although it affects measurement of production
in these countries more.

Chapter 25 in the 2008 SNA – Informal
aspects of the economy

•
Ensure all activities (incl. hidden and underground)
are encompassed in measures of total,
•
Define and measure Informal activities.
23 July 2016
- UNECE Statistical Division
Slide 4
Non-observed economy and
Informal Sector
Not observed,
not informal
Observed,
informal
Not observed, informal
23 July 2016
- UNECE Statistical Division
Slide 5
Conceptual framework





The 2008 SNA
Measuring the Non-Observed Economy.
Handbook (2002) – jointly prepared by OECD,
IMF, ILO and CISSTAT
ILO 15th ICLS, Delhi Group on Informal Sector
Eurostat Pilot Projects on Exhaustiveness in 1998
and 2002 – Guidelines on Tabular Frameworks
UNECE surveys on country practices in
measuring the NOE (1993, 2002, 2005/06)
23 July 2016
- UNECE Statistical Division
Slide 6
Non-Observed economy
Measuring the Non-Observed Economy. Handbook (2002)
http://www.unece.org/stats/documents/2007/04/noe/zip.30.r.pdf - in
Russian
5 problem areas:
1) Underground production
2) Illegal production
3) Informal sector production
4) Household production for own final use
5) Deficiencies in data collection
23 July 2016
- UNECE Statistical Division
Slide 7
Informal Sector: ICLS & SNA differences
1)Typology of production units
•
part of SNA households and household enterprises as market
producers belongs to ICLS formal sector (meaning of sector different
from SNA)
2) Segmenting the economy
•
•
Informal own account enterprises and enterprises of informal employers
Criterion of non-registration in many countries does not coincide with
lack of legal entity and complete set of accounts
3) Criterion of market producers – ‘some or all’ vs. ‘most or all’
4) Special cases: ICLS excludes owner-occupied dwellings,
services for own final use by paid domestic staff, treats
separately agricultural and non-agricultural activities.
23 July 2016
- UNECE Statistical Division
Slide 8
Eurostat tabular approach



Developed for the projects on Exhaustiveness
of National Accounts with EU Candidate
Countries
First project (1998 – 2000): Tabular approach
T1 –T8;
Second Project (2002 – 2003): refined Tabular
approach to exhaustiveness N1 – N7
23 July 2016
- UNECE Statistical Division
Slide 9
Eurostat tabular approach

Defines standard set of non-exhaustiveness types (N1
to N7) and presents them in a tabular framework;

Provides a comprehensive and systematic
assessment to ensure exhaustiveness of NA;

Facilitates cross-country comparisons of adjustments
and adjustment methods and provides for similar level
of coverage of NA.

However, the distinction between the N-types is
important but it is not the main goal;

Main goal: produce accurate NA and GDP estimates.
23 July 2016
- UNECE Statistical Division
Slide 10
Total economy (all activities of all
producers)
Covered by enterprise
surveys
Yes
No
Not -surveyed
Surveyed
Administrative
registration?
Yes
No
Not registered
No
Registered
Deliberately Not Required
not registered to Register
N1
Responding?
N3
Yes
Non-response
incorrectly
handled
Legal
person
Enterpreneur
N4
N5
N7a
Not all data
are available
N7b
Misreporting
N6
Illegal producer
N2
Slide 11
Measurement of Non-Observed economy
Measurement of NOE involves action on two
fronts:


23 July 2016
Improvements in direct measurement by the
data collection programme, resulting in fewer
non-observed activities and hence fewer nonmeasured activities; and
Improvements in indirect measurement during
compilation of the national accounts, resulting in
fewer non-measured activities.
- UNECE Statistical Division
Slide 12
Exhaustiveness – NA methods
Indirect methods of covering NOE in the GDP
estimate:
•
•
•
•

Supply based approaches, including LIM;
Demand based approaches;
Income based approaches;
Commodity flow approaches.
Labour Input Method (LIM) is the most important
procedure that has been used since 1950s to
measure contribution of unorganised sector to
GDP.
23 July 2016
- UNECE Statistical Division
Slide 13
Supply and use framework

commodity flow method at the level of the whole
economy
•
•
•
•
•

breakdown of total output or sales by product for goods
and services
data on exports and imports of goods and services.
estimates of the ratios of intermediate consumption to
output for various industries.
total intermediate consumption by product,
final household consumption expenditure, gross fixed
capital formation, and changes in inventories by product
balancing – removing inconsistencies for the
benchmark year and subsequent years
23 July 2016
- UNECE Statistical Division
Slide 14
UNECE Surveys on country practices
UNECE surveys
•
1991: 9 countries
2001/02: 29 countries
2005/06: 43 countries
•
•


Inventory of current methods and
practices in estimating NOE
Implications and effects on National
Accounts
23 July 2016
- UNECE Statistical Division
Slide 15
UNECE Surveys on country practices




EU member countries - from ~ 1% to ~ 18.9% (from
6.6 to 18.9 among new EU members)
EECCA countries - from 10.7 % to 31.6%
SEE countries - from 8.8 % to 30.6 %
Turkey (1.7%); Mongolia (between 13.0% and 30.0%)
Armenia
2003
28.9
Moldova
2001
31.6
Azerbaijan
2003
20.7
Russia
2003
24.3
Belarus
2003
10.7
Tajikistan
Year not
stated
25
Georgia
2004
28.3
Turkmenistan
2005
18.1
Kazakhstan
2003
21.6
Ukraine
2003
17.2
Kyrgyzstan
2003
17.0
Uzbekistan
Year not
stated
29-30
23 July 2016
- UNECE Statistical Division
Slide 16
Problems in the countries of the region
Overall infrastructure


Large number of unregistered enterprises, irregular and
individual activities, unregistered employed persons
High turnover of enterprises, changes in types of economic
activities
Statistical infrastructure






Links between all administrative registers and the statistical
business register
Use of exhaustive and updated business register as a base for all
establishments surveys
Difficulties related to sample surveys
Difficult to check the reliability of reported data
Measuring illegal activities
Etc.
23 July 2016
- UNECE Statistical Division
Slide 17
Adjustments to NOE Activities
NR
N1
N2
NS
N3
Armenia
V
V
Azerbaijan
V
V
Belarus
V
V
Kazakhstan
V
Kyrgyzstan
N5
O
N6
N7
V
V
V
V
V
V
V
V
V
Republic of Moldova
V
V
V
Russian Federation
V
V
V
V
Tajikistan
V
V
V
V
Turkmenistan
V
V
V
Ukraine
V
V
V
Uzbekistan
V
V
Georgia
V
V
Mongolia
V
V
Albania
V
Montenegro
V
Serbia
V
V
Croatia
V
V
The FYR Macedonia
V
V
V
Turkey
V
V
V
23 July 2016
V
N4
M
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
- UNECE Statistical Division
Source: UNECE, 2008
Slide 18
Improvement of basic data
Statistical data requirements

•
make known the requirements and data problems of
GDP compilation to the branch statisticians
inform main users about the NOE problem areas
•
Institutional framework

•
legislation, access to administrative data, relation
between confidentiality and non-response or
misreporting
Conceptual framework of data collection

•
units, classifications
Data collection mechanisms

•
23 July 2016
administrative sources, statistical business register,
surveys
- UNECE Statistical Division
Slide 19
Implementation strategy
Steps:




Formulate aims, consult internal and external users
Select an analytical framework
Assess NA and basic data collection programme
Identify and prioritise NOE improvements
Special features in transition countries:




priorities: underground, informal
analytical framework linked to priorities
introducing sample surveys
cooperation with other government agencies
23 July 2016
- UNECE Statistical Division
Slide 20
Issues for discussion
Is Eurostat tabular framework best fitted for NA
for the region ?
Why large portion of units are still in nonobserved, while registration is required ?


Use of better coordination with all administrative
registers
•
Country experiences for measuring the NOE





23 July 2016
Illegal, underground activities;
Own-account non-agricultural goods production solely
for own final use
Statistical underground
Informal sector enterprises
- UNECE Statistical Division
Slide 21