Viet Vu
Consultant
UN STATISTICS DIVISION
1
 Introduction
A
to production approach to GDP
trategy for data collection for benchmark year
 Data
extrapolation by use of surveys on production
and labour force

GDP is the sum of value added.

Value added is the difference between gross output and
intermediate consumption

Gross output is the value of goods and services receivable
by producers. It is called gross output at basic prices. In this
case, gross output:
 does not including cost of delivery unless it is part of the
sale price of products.
 does not include taxes paid by customers but transferable
to the government.
 is the same as revenues or sales reported in business
accounting.

Intermediate consumption is the cost of all goods and
services used in producing the output. It excludes all nondeductible value added taxes.



Output is a concept used in national accounting,
not a concept used in business accounting.
To get information for compiling output, one needs
to collect information business understand.
The common terms in business accounting are:
 Revenues/Sales: include sales of major products and other
incidental revenues.
 Cost of Sales/Cost of goods sold
 Cost of goods bought for resale (in the same conditions as
received)
 Cost of sales




Cost of materials
Cost of services
Cost of labor
Other costs like depreciation

Sales: must be converted to output as sales can come
from inventories, and as output can entered inventories
instead of being sold.

Cost of Sales: must be converted to cost of
production as materials used in production can be
obtained from inventories. This means that:
 Purchases of materials: must be converted to use of materials.

Output of manufactured output

Intermediate consumption of materials =
= Sales + Change
in inventory of finished and semi finished goods.
Purchases of materials – Change in inventory of materials.



Services may be produced and delivered directly to
purchasers for immediate use and therefore there
is no delivery costs such as trade and transport
margins.
In most cases, output of services is revenues/sales
and normally called fees.
Exceptions:
 Output for distributive trade or trade margins= Sales - Cost
of goods bought for resale.
 Output of banking: Estimated fees on deposits + Estimated
fees on loans/investment assets + other direct fees.
 Output of insurance: Premiums + Adjusted Premium
supplements – Adjusted claims.
Sphere where basic and
producer prices apply
Producers of
goods
Sphere where purchasers’ prices
apply
Transport and trade
margins added
Wholesalers
and retailers
basic values =
value receivable
•Plus taxes on products
•Less subsidies on products
•Equal: Producer prices
Consumers: other
Government
producers and final
users.
Value at basic
prices
Output
(Goods) at
basic prices
Output of
services at
basic prices
Total output of
goods and
services
+
+
+
Trade
margins
Transport margins
Taxes less
subsidies on
products
Taxes less
subsidies on
products
0
0
+
= value at
purchaser prices
paid by users
Output at
purchaser prices
Output at
purchaser prices
Output at
purchaser prices
For total economy:
1. Output at purchasers prices = output at basic prices + taxes less
subsidies on products.
2. GDP = Output at purchasers prices – Intermediate at purchasers prices.
3. GDP = Value added at basic prices + Taxes less subsidies on products
For non-market activity
•Net operating surplus is zero
•VA can be calculated directly
Gross output
Total value of output of goods and services at basic prices
Less
Total intermediate consumption at purchasers’ prices (not
including deductible VAT)
= Gross Value Added
Gross value added at basic prices
Less
Other taxes less subsidies on production
Less
Compensation of employees
• Wages and salaries
• Bonuses & allowances
• Social insurance payable by employers
Less
Consumption of fixed capital (imputed on fixed assets
Equal
Net operating surplus
GDP = Gross value added at basic prices +
Taxes on products – Subsidies on products




Value added for non-market producers are calculated
directly, unlike that of market producers which is
calculated as a residual. Operating surplus is assumed
to be zero.
Value added at basic prices= Compensation of
employees + other taxes (less subsidies) on production
+ consumption of fixed capital.
Gross output at basic prices = Intermediate
consumption + value added at basic prices.
Data: Administrative sources




ISIC is an international system of classification of economic activity
on which national economic activity classification (NSIC) should be
based. This basically means that NSIC can be reclassified into ISIC
for international comparison purposes.
Fact: It has been confirmed by many studies that value added and
even intermediate consumption at the detailed levels as ratios of
gross outputs are very stable in the short-run and quite stable in the
long-run as technology reflected by those ratios take time to
change.
Consequence: Value added ratios are used to estimate value added
given gross outputs.
Procedure: surveys are carried out monthly, quarterly or annually to
obtain gross outputs. Value added ratios are applied gross outputs
to estimate value added.
Monthly, quarterly
surveys on output by
ISIC
VA ratios
VvvvvvggVaVVvvV
of
VVAVVVV
Benchmark year
Estimated quarterly
value added
=VA ratios x outputs of
the quarter
Quarterly Value
added must be
reconciled to annual
value added
Estimated annual value
added
=VA ratios x outputs of
the year
Annual surveys
on output and also by value
added by ISIC

Estimates will be more reliable if value added ratios are
available at detailed level because:
 Production technology is different for different activity:
Using only agricultural value added ratios are less reliable
than using detailed valued ratios for specific crops, animal
production, vegetation, etc. to estimate the components
and sum them up.
 The structure of a more aggregate grouping changes more
quickly due to demand than due to production technology.

Estimates will be more reliable if value added ratios are
frequently updated, either every year or at least every
five years.


Employment, preferably working hours collected
through labor force survey: useful for household
activities.
Other physical indicators such as crop production, kwh
of electricity, tons of petroleum produced, etc.


Though value added can be calculated more reliably by
economic activity but data can only be collected from
production units which have identifiable addresses and
can respond to questionnaires.
This will be the subject of the next part.

Statistical units are the entities for which information is
sought and for which statistics are ultimately compiled. These
units can, in turn, be divided into observation units and
analytical units. The statistical units in the International
Standard Industrial Classification (ISIC) Rev. 4 comprise:




enterprise;
enterprise group;
establishment;
local unit;
 kind-of-activity unit (KAU);
 homogeneous unit of production.
Observation
units
Analytical
units


Establishments are statistical units that are observable, with
addresses and therefore able subject to surveys.
They can be:
 an enterprise -cum -establishment: a legal unit located in one
geographical area, engages in one type of economic activity and
produces one type of product.
 full-fledged establishment as a part of an enterprise :with
identifiable activity and location and with full cost accounting
 Local unit: a part of an enterprise but located in a separate
geographical location from the main location with identifiable
activity and with full cost accounting (a local unit identified as
establishment).
 a government unit : with accounts of costs, fixed assets.
 a non-profit institution
 a household: engages in production, like farming, manufacturing,
operating shops from home or outside home.
One establishment corporation (=enterprise = legal unit)
Production
establishment, ISIC x
Multi-establishment corporation
Headquarter
establishment
(ISIC x3)
Production
establishment, ISIC x1
Production
establishment, ISIC x2
May or may
not locate in
the same
geographical
areas
Universe of
Establishment/enterprises
List-frame segment
(corporations)
Large units
Public sector
Small units
Non-list frame segment
(households)
With fixed
premises
Without
fixed
premises
Private
sector
In business register
Census and sample
surveys
Not in business register
Household-based area
sampling surveys

A listing of all large and probably medium corporations (legally

Large corporations:
incorporated enterprises) is needed. Only information on employment,
and probably sales on local units identified by ISIC are requested. Large:
250 employees and over, Medium:50-250 employees.
 Census should cover all large corporations. Large is defined by UN
International Recommendations for industrial Statistics as having at
least 250 employees.
 Annual and monthly surveys: All large corporations or a large sample
should be covered.

Medium, small and micro corporations:
 Census or annual and monthly surveys: only samples are needed. Sample size
varies inversely by type of corporation size.
 Small and micro corporations if not in the list frame may be treated as part of
non-listed frames

Household unincorporated units (non-listed frame):
 Identify household-based enterprises by area sampling
 Sample surveying household-based enterprises

Farm census:
 A census is a complete count of farms and ranches. A very few
country, where farms (organized as corporations) are less
numerous, censuses on farm revenues and costs are carried
out every 5 years.
 For example, the US has had recent censuses on 1992, 1997,
2002, 2007. In 2007 it has 2.2 millions farms.

Surveys:
 Sample surveys of farms can be carried out
annually/seasonally from prospective plantings to production
incomes and output.

Census: For most countries with huge number of farms which
are not incorporated, agriculture census focuses mainly on
land use.
 Crops:
 Census of land use
 Surveys on yield rates
 Plantations (fruit trees, coconut trees, coffees, orchards, etc.)
• Similar to above and/or
• Survey/reports of Corporations
 Animal stocks


Survey: yield rates by crop cutting are carried out for
estimating output.
Rural Household surveys on supplementary agricultural
products in backyards.


Statistical units for non-market activities are
normally identical with administrative units for
which administrative data are regularly required.
Output may be estimated by using data provided in
budget plans, corrected for historical and normal
deviations between planned budgets and realized
budgets.


Data will be revised when realized budget data is
available.
ISIC Rev. 4
Corporations
(state &
nonstate)
Households
X
X
X
Mining and quarrying
Manufacturing
X
X
X
X
Utility
Construction
Market services
Non-market services
X
X
X
X
X
X
NPISH
General
government
X
X
Agriculture, forestry and fishing
Major products
Supplementary products
1999
2007
100%
100%
General Government
9%
8.52%
Financial corporations
2%
1.81%
41%
30%
0%
0%
49%
59.7%
GDP
Households
Nonprofit institutions
Nonfinancial corporations
Total households
Agriculture
Forestry
Fishery
Mining & Quarrying
Manufacturing
Utility
Construction
Trade & auto repair
Hotels, restaurants
Transport, communication
Finance, insurance
Business services (mainly real estate)
Education
Health
Culture, sports
Personal services
1999
41%
20%
1%
3%
3%
2%
5%
1%
1%
3%
1%
2007
30%
13%
3%
5%
2%
1%
2%
1%
2%
2%
Thank You