National accounts

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National accounts is included in the JEL classification codes as JEL: C82 and JEL:E01

National accounts or national account systems (NAS) are the implementation of complete and consistent accounting techniques for measuring the economic activity of a nation. These include detailed underlying measures that rely on double-entry accounting. By design, such accounting makes the totals on both sides of an account equal even though they each measure different characteristics, for example production and the income from it. As a method, the subject is termed national accounting or, more generally, social accounting . [1] Stated otherwise, national accounts as systems may be distinguished from the economic data associated with those systems. [2] While sharing many common principles with business accounting, national accounts are based on economic concepts. [3] One conceptual construct for representing flows of all economic transactions that take place in an economy is a social accounting matrix with accounts in each respective row-column entry. [4]

Contents

National accounting has developed in tandem with macroeconomics from the 1930s with its relation of aggregate demand to total output through interaction of such broad expenditure categories as consumption and investment. [5] Economic data from national accounts are also used for empirical analysis of economic growth and development. [1] [6]

Scope

National accounts broadly present output, expenditure, and income activities of the economic actors (households, corporations, government) in an economy, including their relations with other countries' economies, and their wealth (net worth). They present both flows (measured but it is over a period) and stocks (measured at the end of a period), ensuring that the flows are reconciled with the stocks. As to flows, the national income and product accounts (in U.S. terminology) provide estimates for the money value of income and output per year or quarter, including GDP. As to stocks, the 'capital accounts' are a balance-sheet approach that has assets on one side (including values of land, the capital stock, and financial assets) and liabilities and net worth on the other, measured as of the end of the accounting period. National accounts also include measures of the changes in assets, liabilities, and net worth per accounting period. These may refer to flow of funds accounts or, again, capital accounts. [1]

There are a number of aggregate measures in the national accounts, notably including gross domestic product or GDP, perhaps the most widely cited measure of aggregate economic activity. Ways of breaking down GDP include as types of income (wages, profits, etc.) or expenditure (consumption, investment/saving, etc.). Measures of these are examples of macro-economic data. [7] [8] [9] [10] Such aggregate measures and their change over time are generally of strongest interest to economic policymakers, although the detailed national accounts contain a source of information for economic analysis, for example in the input-output tables which show how industries interact with each other in the production process.

National accounts can be presented in nominal or real amounts, with real amounts adjusted to remove the effects of price changes over time. [11] A corresponding price index can also be derived from national output. Rates of change of the price level and output may also be of interest. An inflation rate (growth rate of the price level) may be calculated for national output or its expenditure components. Economic growth rates (most commonly the growth rate of GDP) are generally measured in real (constant-price) terms. One use of economic-growth data from the national accounts is in growth accounting across longer periods of time for a country or across to estimate different sources of growth, whether from growth of factor inputs or technological change. [12]

The accounts are derived from a wide variety of statistical source data including surveys, administrative and census data, and regulatory data, which are integrated and harmonized in the conceptual framework. They are usually compiled by national statistical offices and/or central banks in each country, though this is not always the case, and may be released on both an annual and (less detailed) quarterly frequency. Practical issues include inaccuracies from differences between economic and accounting methodologies, lack of controlled experiments on quality of data from diverse sources, and measurement of intangibles and services of the banking and financial sectors. [13]

Two developments relevant to the national accounts since the 1980s include the following. Generational accounting is a method for measuring redistribution of lifetime tax burdens across generations from social insurance, including social security and social health insurance. It has been proposed as a better guide to the sustainability of a fiscal policy than budget deficits, which reflect only taxes minus spending in the current year. [14] Environmental or green national accounting is the method of valuing environmental assets, which are usually not counted in measuring national wealth, in part due to the difficulty of valuing them. The method has been proposed as an alternative to an implied zero valuation of environmental assets and as a way of measuring the sustainability of welfare levels in the presence of environmental degradation. [15]

Macroeconomic data not derived from the national accounts are also of wide interest, for example some cost-of-living indexes, the unemployment rate, and the labor force participation rate. [16] In some cases, a national-accounts counterpart of these may be estimated, such as a price index computed from the personal consumption expenditures and the GDP gap (the difference between observed GDP and potential GDP). [17]

Main elements

The presentation of national accounts data may vary by country (commonly, aggregate measures are given greatest prominence), however the main national accounts include the following accounts for the economy as a whole and its main economic actors.

production accounts which record the value of domestic output and the goods and services used up in producing that output. The balancing item of the accounts is value added, which is equal to GDP when expressed for the whole economy at market prices and in gross terms;
income accounts, which show primary and secondary income flows—both the income generated in production (e.g. wages and salaries) and distributive income flows (predominantly the redistributive effects of government taxes and social benefit payments). The balancing item of the accounts is disposable income ("National Income" when measured for the whole economy);
expenditure accounts, which show how disposable income is either consumed or saved. The balancing item of these accounts is saving.

The accounts may be measured as gross or net of consumption of fixed capital (a concept in national accounts similar to depreciation in business accounts).

Notably absent from these components, however, is unpaid work, because its value is not included in any of the aforementioned categories of accounts, just as it is not included in calculating gross domestic product (GDP). An Australian study has shown the value of this uncounted work to be approximately 50% of GDP, making its exclusion rather significant. [18] As GDP is tied closely to the national accounts system, [19] this may lead to a distorted view of national accounts. Because national accounts are widely used by governmental policy-makers in implementing controllable economic agendas, [20] some analysts have advocated for either a change in the makeup of national accounts or adjustments in the formulation of public policy. [21]

History

The original motivation for the development of national accounts and the systematic measurement of employment was the need for accurate measures of aggregate economic activity. This was made more pressing by the Great Depression and as a basis for Keynesian macroeconomic stabilisation policy and wartime economic planning. The first efforts to develop such measures were undertaken in the late 1920s and 1930s, notably by Colin Clark and Simon Kuznets. Kuznets building on a project that was underway https://www.nber.org/system/files/chapters/c4231/c4231.pdf, Lillian Epstein had been involved in earlier studies. Richard Stone of the U.K. led later contributions during World War II and thereafter. The first formal national accounts were published by the United States in 1947. Many European countries followed shortly thereafter, and the United Nations published A System of National Accounts and Supporting Tables in 1952. [1] [22] International standards for national accounting are defined by the United Nations System of National Accounts, with the most recent version released for 2008. [23]

Even before that in early 1920s there were national economic accounts tables. One of such systems was called Balance of national economy and was used in USSR and other socialistic countries to measure the efficiency of socialistic production. [24]

In Europe, the worldwide System of National Accounts has been adapted in the European System of Accounts (ESA), which is applied by members of the European Union and many other European countries. Research on the subject continues from its beginnings through today. [25]

See also

Related Research Articles

<span class="mw-page-title-main">Gross domestic product</span> Market value of goods and services produced within a country

Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced in a specific time period by a country or countries. GDP is more often used by the government of a single country to measure its economic health. Due to its complex and subjective nature, this measure is often revised before being considered a reliable indicator.

A variety of measures of national income and output are used in economics to estimate total economic activity in a country or region, including gross domestic product (GDP), gross national product (GNP), net national income (NNI), and adjusted national income. All are specially concerned with counting the total amount of goods and services produced within the economy and by various sectors. The boundary is usually defined by geography or citizenship, and it is also defined as the total income of the nation and also restrict the goods and services that are counted. For instance, some measures count only goods & services that are exchanged for money, excluding bartered goods, while other measures may attempt to include bartered goods by imputing monetary values to them.

<span class="mw-page-title-main">Bureau of Economic Analysis</span> US federal government agency

The Bureau of Economic Analysis (BEA) of the United States Department of Commerce is a U.S. government agency that provides official macroeconomic and industry statistics, most notably reports about the gross domestic product (GDP) of the United States and its various units—states, cities/towns/townships/villages/counties, and metropolitan areas. They also provide information about personal income, corporate profits, and government spending in their National Income and Product Accounts (NIPAs).

<span class="mw-page-title-main">Public finance</span> Study of the role of government within the economy

Public finance is the study of the role of the government in the economy. It is the branch of economics that assesses the government revenue and government expenditure of the public authorities and the adjustment of one or the other to achieve desirable effects and avoid undesirable ones. The purview of public finance is considered to be threefold, consisting of governmental effects on:

  1. The efficient allocation of available resources;
  2. The distribution of income among citizens; and
  3. The stability of the economy.
<span class="mw-page-title-main">Government budget balance</span> Difference between revenues and spending

The government budget balance, also referred to as the general government balance, public budget balance, or public fiscal balance, is the difference between government revenues and spending. For a government that uses accrual accounting the budget balance is calculated using only spending on current operations, with expenditure on new capital assets excluded. A positive balance is called a government budget surplus, and a negative balance is a government budget deficit. A government budget presents the government's proposed revenues and spending for a financial year.

Economic data are data describing an actual economy, past or present. These are typically found in time-series form, that is, covering more than one time period or in cross-sectional data in one time period. Data may also be collected from surveys of for example individuals and firms or aggregated to sectors and industries of a single economy or for the international economy. A collection of such data in table form comprises a data set.

The green gross domestic product is an index of economic growth with the environmental consequences of that growth factored into a country's conventional GDP. Green GDP monetizes the loss of biodiversity, and accounts for costs caused by climate change. Some environmental experts prefer physical indicators, which may be aggregated to indices such as the "Sustainable Development Index".

<span class="mw-page-title-main">Gross fixed capital formation</span> Macroeconomic concept

Gross fixed capital formation (GFCF) is a component of the expenditure on gross domestic product (GDP) that indicates how much of the new value added in an economy is invested rather than consumed. It measures the value of acquisitions of new or existing fixed assets by the business sector, governments, and "pure" households minus disposals of fixed assets.

The value product (VP) is an economic concept formulated by Karl Marx in his critique of political economy during the 1860s, and used in Marxian social accounting theory for capitalist economies. Its annual monetary value is approximately equal to the netted sum of six flows of income generated by production:

The System of National Accounts is an international standard system of national accounts, the first international standard being published in 1953. Handbooks have been released for the 1968 revision, the 1993 revision, and the 2008 revision. The System of National Accounts, in its various released versions, frequently with significant local adaptations, has been adopted by many nations. It continues to evolve and is maintained by the United Nations, the International Monetary Fund, the World Bank, the Organisation for Economic Co-operation and Development, and Eurostat.

In economics, gross output (GO) is the measure of total economic activity in the production of new goods and services in an accounting period. It is a much broader measure of the economy than gross domestic product (GDP), which is limited mainly to final output. As of first-quarter 2019, the Bureau of Economic Analysis estimated gross output in the United States to be $37.2 trillion, compared to $21.1 trillion for GDP.

<span class="mw-page-title-main">Capital formation</span> Concept in macroeconomics, national accounts and financial economics

Capital formation is a concept used in macroeconomics, national accounts and financial economics. Occasionally it is also used in corporate accounts. It can be defined in three ways:

Double counting in accounting is an error whereby a transaction is counted more than once, for whatever reason. But in social accounting it also refers to a conceptual problem in social accounting practice, when the attempt is made to estimate the new value added by Gross Output, or the value of total investments.

Material Product System (MPS) refers to the system of national accounts used by 16 Communist countries for different lengths of time, including the former Soviet Union and the Eastern Bloc countries, Cuba, China (1952–1992) and several other Asian countries. The MPS has now been replaced by the UNSNA accounts in most countries that used MPS, although some countries such as Cuba and North Korea have continued to use MPS alongside UNSNA-type accounts. Today it is difficult to obtain detailed information about accounting systems which are an alternative to UNSNA, and therefore few people know that such systems exist and have been used by various countries.

In economics, distribution is the way total output, income, or wealth is distributed among individuals or among the factors of production. In general theory and in for example the U.S. National Income and Product Accounts, each unit of output corresponds to a unit of income. One use of national accounts is for classifying factor incomes and measuring their respective shares, as in national Income. But, where focus is on income of persons or households, adjustments to the national accounts or other data sources are frequently used. Here, interest is often on the fraction of income going to the top x percent of households, the next x percent, and so forth, and on the factors that might affect them.

Public economics(or economics of the public sector) is the study of government policy through the lens of economic efficiency and equity. Public economics builds on the theory of welfare economics and is ultimately used as a tool to improve social welfare. Welfare can be defined in terms of well-being, prosperity, and overall state of being.

Education economics or the economics of education is the study of economic issues relating to education, including the demand for education, the financing and provision of education, and the comparative efficiency of various educational programs and policies. From early works on the relationship between schooling and labor market outcomes for individuals, the field of the economics of education has grown rapidly to cover virtually all areas with linkages to education.

Natural capital accounting is the process of calculating the total stocks and flows of natural resources and services in a given ecosystem or region. Accounting for such goods may occur in physical or monetary terms. This process can subsequently inform government, corporate and consumer decision making as each relates to the use or consumption of natural resources and land, and sustainable behaviour.

<span class="mw-page-title-main">United Kingdom National Accounts – The Blue Book</span>

The annual United Kingdom National Accounts records and describes economic activity in the United Kingdom and as such is used by government, banks, academics and industries to formulate the economic and social policies and monitor the economic progress of the United Kingdom. It also allows international comparisons to be made. The Blue Book is published by the UK Office for National Statistics alongside the United Kingdom Balance of Payments – The Pink Book.

This glossary of economics is a list of definitions of terms and concepts used in economics, its sub-disciplines, and related fields.

References

  1. 1 2 3 4 Nancy D. Ruggles, 1987. "social accounting," The New Palgrave: A Dictionary of Economics , v. 4, pp. 377–82.
  2. ↑ United Nations, The System of National Accounts and ö National Accounts Data.
  3. ↑ Joel S. Demski, 2008. "accounting and economics," The New Palgrave Dictionary of Economics. Abstract.
  4. ↑ Graham Pyatt and Jeffery I. Round, ed., 1985. Social Accounting Matrices: A Basis for Planning, World Bank.
  5. ↑ John Maynard Keynes, 1936. The General Theory of Employment, Interest and Money , Macmillan.
  6. ↑ Mankiw, N. Gregory; Romer, David; Weil, David N. (1992). "A Contribution to the Empirics of Economic Growth". Quarterly Journal of Economics . 107 (2): 407–437. CiteSeerX   10.1.1.335.6159 . doi:10.2307/2118477. JSTOR   2118477. S2CID   1369978.
  7. ↑ Referred to in the Journal of Economic Literature classification codes under JEL: C8 - Data Collection and Data Estimation Methodology and JEL: E01 - Measurement and Data on National Income and Product Accounts and Wealth.
  8. ↑ T. P. Hill (2001). Macroeconomic Data. International Encyclopedia of the Social & Behavioral Sciences. pp. 9111–9117. Archived from the original on January 5, 2013.
  9. ↑ Lequiller, François; Blades, Derek (2006). Understanding National Accounts. OECD.
  10. ↑ François, Lequiller; Blades, Derek W.; Derek, Blades (January 1, 2006). Understanding National Accounts - Lequiller François, Derek W. Blades - Google Boeken. ISBN   9789264025660 . Retrieved March 25, 2013.
  11. ↑ • Amartya Sen, 1979. "The Welfare Basis of Real Income Comparisons: A Survey," Journal of Economic Literature, 17(1), p p. 1–45.
       • D. Usher, 1987. "real income," The New Palgrave: A Dictionary of Economics, v. 4, p. 104.
  12. ↑ From The New Palgrave Dictionary of Economics , 2008, 2nd Edition, with Abstract links:
       • "economic growth" by Peter Howitt and David N. Weil
       • "growth accounting" by Francesco Caselli.
  13. ↑ • Oskar Morgenstern, 1963. On the Accuracy of Economic Observations, 2nd ed. ch. 16. Princeton.
       • H. O. Stekler, 1964. [Review], Journal of the American Statistical Association, 59(307), pp. 965-967.
       • J. Steven Landefeld, Eugene P. Seskin, and Barbara M. Fraumeni. 2008. "Taking the Pulse of the Economy: Measuring GDP." Journal of Economic Perspectives, 22(2), pp. 193–216. PDF link Archived August 9, 2017, at the Wayback Machine (press +).
       From The New Palgrave Dictionary of Economics, 2nd Edition, with Abstract links:
      • "intangible capital" by Daniel E. Sichel
       • "national income" by Thomas K. Rymes.
  14. ↑ • The Economist , Economics A-Z, "Generational Accounting." Accessed 9 Aug. 2010.
       • Jagadeesh Gokhale, 2008. "generational accounting." The New Palgrave Dictionary of Economics , 2nd Edition. Abstract and uncorrected proof.
       • Laurence J. Kotlikoff, 1992. Generational Accounting: Knowing Who Pays, and When, for What We Spend. Free Press. Review extract [ permanent dead link ].
  15. ↑ From The New Palgrave Dictionary of Economics, 2008, 2nd Edition, with Abstract links:
       • "green national accounting" by Sjak Smulders
       • "sustainability' by Daniel W. Bromley
       • National Research Council, 1994. Assigning Economic Value to Natural Resources, National Academy Press. Chapter links.
  16. ↑ • Robert Topel, 2008. "unemployment," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
      • Katharine Bradbury, 2008. "unemployment measurement," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
  17. ↑ Robert J. Gordon and Peter K. Clark, 1984, "Unemployment and Potential Output in the 1980s," Brookings Papers on Economic Activity, (2), pp. 537-568 Archived 2016-05-21 at the Portuguese Web Archive.
  18. ↑ Blades, François Lequiller, Derek (2006). Understanding national accounts (Reprint. ed.). Paris: OECD. p. 112. ISBN   978-92-64-02566-0.{{cite book}}: CS1 maint: multiple names: authors list (link)
  19. ↑ Blades, François Lequiller, Derek (2006). Understanding national accounts (Reprint. ed.). Paris: OECD. ISBN   978-9264025660. GDP lies at the heart of the system of national accounts.{{cite book}}: CS1 maint: multiple names: authors list (link)
  20. ↑ "National Income Accounting and Public Policy" (PDF).
  21. ↑ "National Accounts: A Practical Introduction" (PDF).
  22. ↑ André Vanoli, 2008. "national accounting, history of," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
  23. ↑ United Nations, System of National Accounts 2008-2008 SNA.
  24. ↑ Economic theory, .
  25. ↑ National Bureau of Economic Research Book Series, 1937-2010. Studies in Income and Wealth , 71 v.
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