Integrating Industry and National Economic Accounts

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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 Meeting
• October 12-15, 2004

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Outline

• BEAs vision for integrating the accounts
• Methodologies for integration
• Steps for integration
• Future research

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BEA Accounts
Three approaches to estimate GDP

• 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

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BEAs 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
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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
Benchmark I-O Value Added
  GDP-by-Industry Value Added
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Evaluation Criteria (1) Benchmark I-O Accounts

• Share of an industrys intermediate inputs
  covered by quinquennial economic census
• Share of an industrys 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 industrys 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
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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_at_bea.gov