Integrating Industry and National Economic Accounts

Ann Lawson, Brian Moyer, Sumiye Okubo, and Mark Planting

Industry Economics Division

Presentation for the 2004 OECD National Accounts Expert MeetingOctober 12-15, 2004

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Outline

• BEA’s vision for integrating the accounts

• Methodologies for integration

• Steps for integration

• Future research

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BEA Accounts

1. Expenditures approach:

GDP = C + I + G + (X - M)

2. Income approach:

GDP = Compensation of employees

+ Gross operating surplus

+ Taxes on production and imports, less subsidies

3. Production approach:

GDP = Gross output - Intermediate inputs

Three approaches to estimate GDP

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BEA’s Vision for Integrating the Accounts

• Long-term: Full Integration (2008-2010)– Integration of all industry accounts and

integration of industry accounts with the national income and product accounts (NIPAs)

– Provide a third independent measure of GDP• Short-term: Partial Integration (2004-2007)

– Integration of the Annual I-O and GDP-by- industry accounts

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Value Added Estimates Depend on Quality of Data

I-O accounts• Value added = Gross output -

intermediate inputs

• Quality of gross output is high, but overall quality of intermediate inputs is not

GDP-by-industry accounts• Value added =

Compensation of employees + gross operating surplus + taxes on production and imports, less subsidies

• Quality depends on source data; gross operating surplus is most problematic

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Partial Integration: Five Steps to Integrate Industry Accounts

• Develop consistent level of industry detail

• Develop revised 1997 benchmark I-O table

• Develop time series of gross output and value added by industry

• Apply I-O framework to develop time series of annual accounts

• Develop real (inflation adjusted) measures

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Step 1: Develop Consistent Level of Industry Detail

Industries and Commodities in the Integrated Accounts

1997 NAICS sectors 1997 NAICS codes

All industries Private industries Agriculture, forestry, fishing, and hunting………….. 11 Mining …………………………………………………. 21 Utilities ………………………………………………… 22 Construction ………………………………………….. 23 Manufacturing ………………………………………… 31, 32, 33 Wholesale trade ……………………………………… 42 Retail trade …………………………………………… 44, 45 Transportation and warehousing …………………… 48, 49 Information ……………………………………………. 51 Finance and insurance ……………………………… 52 Real estate and rental and leasing ………………… 53 Professional, scientific, and technical services ….. 54 Management of companies and enterprises ……… 55 Administrative and waste management services … 56 Educational services ………………………………… 61 Health care and social assistance ………………… 62 Arts, entertainment, and recreation ……………….. 71 Accommodation and food services ………………… 72 Other services, except government ……………….. 81

Government …………………………………………. 92

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Step 2: Develop Revised 1997 Benchmark I-O Table

• Incorporate results of 2003 NIPA revisions

• Set best levels and composition of value added for each industry

– Incorporate the best estimates from both sets of accounts

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Merging Information for Value-Added Levels

 GDP-by-Industry Value Added

 

Good Benchmark data/good GDP-by-industry

data

 

e.g., Health care

 

Good Benchmark data/poor GDP-by-industry

data e.g., Mining

 

Poor Benchmark data/good GDP-by-industry

data 

e.g., Transportation/Warehousing

 

 

Poor Benchmark data/poor GDP-by-industry

data 

e.g. Construction

Benchmark I-O Value Added

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Evaluation Criteria: (1) Benchmark I-O Accounts

• Share of an industry’s intermediate inputs covered by quinquennial economic census

• Share of an industry’s total gross output accounted for by quinquennial census

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Evaluation Criteria: (2) GDP-by-Industry Accounts

• Quality and size of adjustments made to convert enterprise-based, profit-type income to establishment basis

• Share of an industry’s value added accounted for by proprietors’ income

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Merging Information from Benchmark I-O & GDP-by- Industry Accounts

• Based on our criteria: – Identify point estimate and variance of value

added for each publication-level industry in the benchmark I-O and GDP-by-industry accounts

– Develop probability distribution of value added for each industry in each set of accounts

– Combine the two distributions to get the “best” estimate of value added for each industry

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Merging Information: An Example

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Step 3: Time Series of Gross Output and Value Added by Industry

• Set levels of industry gross output and value added to the revised 1997 benchmark I-O table

• Extrapolate gross output by industry using annual survey data from the Bureau of the Census

• Develop time series of value added by industry by applying GDI extrapolators to 1997 levels

• Adjust industry estimates to take into account statistical discrepancy and extrapolation errors

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Step 4: Develop Time-Series of Balanced Annual I-O Accounts

• Prepare annual I-O tables, given estimates of gross output, value added, and final demand

• Balance annual I-O tables to establish internal consistency and consistency with GDP-by-industry accounts

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Input-Output Use Table

OutputCommodity

TotalFinal Uses (GDP)

Commodities

AddedValue

Total Industry Output

Industries

GDPGOVTMXCBIPFIPCEUse

IntermediateTotal

OtherServicesFinanceTradetion

Transportaing

Manufacturon

ConstructiMiningAgriculture

Agriculture

Minerals

Construction

Manufacturing

Transportation

Trade

Finance

Services

Other

Noncomp. imports

inputsTotal interm

Comp

imports, less subsTaxes on prod.&

Gross op surpl

Total

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Step 5: Develop Real Measures

• Apply double-deflation procedure to these measures of gross output and intermediate inputs to develop real measures of value added

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Future Research

• Evaluate coverage, quality, and consistency of source data from statistical agencies

• Develop additional procedures to incorporate new data from 2002 Economic Census and intermediate input data from expanded annual surveys

• Develop new processes and procedures for incorporating information from a production-based approach to measuring GDP into the NIPAs

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Questions?

• Sumiye.okubo@bea.gov