Review of Expenditure Aggregates

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Review of Expenditure Aggregates

• Derek Blades
• World Bank Consultant

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Contents

• Expenditure aggregates
• Valuation
• Two measures of consumption

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Main expenditure aggregates
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Expenditure Aggregates of 1993 SNA
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Expenditure Aggregates of 1993 SNA
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(No Transcript)
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Household consumption expenditure

• Real expenditures
• food, clothing, transport, rent, services.
• Imputed expenditures
• rents of owner-occupiers
• food and other goods for own consumption
• goods and services provided as income in kind

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Consumption expenditure by NPISHs

• Examples
• religious organisations (mosques, temples,
  churches, schools, clinics, hospitals)
• trade unions
• political parties in multi-party states
• UNICEF, OXFAM, Red Crescent
• Consumption expenditure is the total of
• compensation of employees,
• intermediate consumption,
• consumption of fixed capital,
• taxes less subsidies on production
• minus any payments received from households for
  services provided.
• Only one basic heading no breakdown by type

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Consumption Expenditure by Government

• All levels of government are covered-central,
  federal, provincial, local, townships
• Consumption expenditure is the total of
• compensation of employees,
• intermediate consumption,
• consumption of fixed capital,
• taxes less subsidies on production
• minus any payments received from households for
  services provided.
• Divided between individual and collective

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Individual versus Collective

• Most expenditures on housing, health, recreation
  and culture, education and social protection are
  individual. (21 basic headings)
• Expenditures on general public services, defence,
  public order and safety, economic affairs and
  environment protection are collective. (5 basic
  headings)

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Gross fixed capital formation (GFCF)

• Goods that are expected to be used in production
  for several years
• GFCF is always measured net of sales
• sales for scrap, sales to other domestic
  producers, exports of second-hand assets
• 1993 SNA includes expenditures on software and on
  mineral exploration in GFCF
• Three basic headings
• Machinery and equipment
• Construction
• Other products

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Change in inventories

• Work in progress - construction, ships
• Stocks of raw materials, finished goods, goods
  for resale, goods stored by government as
  strategic reserves, such as food and fuel.
• Estimates may not be comprehensive but should
  cover important items such as food and fuel
  stocks, stocks of mining companies, large
  retailers...

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Acquisitions less disposal of Valuables

• Valuables are goods acquired as a store of value
• Precious metals
• Paintings and antiques
• Jewellery
• Not used in production

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Valuation
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Valuation - general rule

• General rule is to use the prices at which sales
  of goods and services are transacted -
  purchasers (or market) prices.
• These prices may be reduced by discounts or
  rebates
• bargaining, sales, bulk purchases
• Note that price data for ICP must also reflect
  discounts or rebates.

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Valuation - imputed rents

• Use rents actually paid for similar kinds of
  dwellings, in similar locations and with similar
  facilities
• If not possible, rents are valued at cost -
  consumption of fixed capital, return on capital,
  regular maintenance, and insurance

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Valuation goods produced for own consumption

• Prices in local markets for livestock,
  vegetables, fruit
• Estimated basic prices for furniture, textiles,
  hand-tools (retail prices less sales taxes and
  retail margins)

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Valuation Government and NPISH

• Compensation of employees not only wages and
  salaries
• Intermediate consumption valued at purchasers
  prices
• Consumption of fixed capital in current prices
  (not historical)
• Taxes less subsidies on production
• minus any payments received from households for
  services provided.

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Valuation - GFCF

• GFCF is valued at purchasers prices
• Prices should include
• cost of transport
• cost of installation
• and any fees or taxes for transfer of ownership.
  
• Own-account production of fixed capital assets is
  valued at basic prices or, if not available, at
  the costs of production.

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Valuation - Change in Inventories

• The change in inventories must reflect only the
  physical change - not holding gains or losses due
  to changes in prices during the year.
• The physical quantities of inventories at the
  beginning and end of the year are usually valued
  using the average prices over the year or,
  failing that, mid-year prices.

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Valuation - Exports and Imports

• Exports of goods and services
• Free-on-board (f.o.b.) prices
• Imports of goods and services
• Cost, insurance, freight (c.i.f.) prices

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Two Measures of Consumption
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Two ways of looking at consumption

• Who buys?

• Who consumes?

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Consumption Expenditure versus Actual Consumption

• Consumption expenditure
• Households
• Non-profit institutions
• Government
• Individual
• Collective

• Actual consumption
• Households
• Household expenditures
• Non-profit institutions
• Government individual expenditures
• Government
• Government collective expenditures

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To summarise

• Actual consumption of households consists of
• All consumption expenditure of households
• All consumption expenditures of non-profit
  institutions serving households
• Individual consumption expenditures of government
• Actual consumption expenditure of government
  consists of
• Collective consumption expenditures of government
• ICP compares actual consumption, not consumption
  expenditures