Transcript Estimation methods

Introduction to the System of
National Accounts (SNA)
Lesson 10
Some special estimation methods
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1
What are special estimation methods?
This lesson looks at five estimation techniques
that countries have developed to deal with
difficult components of GDP(P) and GDP(E):
–
–
–
–
–
Informal (or “hidden”, “non-observed”) activities
Imputed rents of owner occupiers
Subsistence
Building and construction
Machinery and equipment
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The Italian Method (1)
• The Italian statistical office (ISTAT) developed a
procedure for estimating the contribution to GDP
of the informal, hidden, or non-observed economy.
This is often referred to as the “Italian Method”
• To apply the Italian Method you need:
– An estimate of the total employment by kind of activity
– An enterprise survey collecting data on value added and
numbers employed by kind of activity
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The Italian Method (2)
• The next step is to estimate informal employment for
each kind of activity. This is just the difference
between the estimate of total employment and
employment as recorded in the enterprise survey.
• Informal value added is then obtained as :
– informal employment times
– enterprise survey value added divided by enterprise survey
employment
• Countries calculate informal output and intermediate
consumption in the same way
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Informal Employment as Percent of Total Employment:
Georgia 2008
Other personal services
Trade
Hotels and restaurants
Education
Business services
Transport
Construction
Health and social work
Manufacturing
Mining
Communications
Fiancial instituions
GDP
0
10
20
National Accounts of Georgia, 2008, Geostat, Tbilisi 2009
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30
40
50
60
70
80
90
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Imputed rents of owner occupiers
• SNA suggests that rents of owner-occupiers
should be imputed using rents actually paid for
comparable dwellings
• In many countries there are few dwellings for
rent
–
–
–
–
Not representative of the dwelling stock
Only available in the capital
Mostly rented by expatriates
Traditional – own-built - dwellings rarely rented
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User cost
• User cost is an alternative to the SNA method
• User cost simulates rents by adding up the
costs of renting a dwelling
• Costs are:
– Repairs and maintenance
– Insurance
– Taxes on dwellings
– Consumption of fixed capital
– Operating surplus
• Capital gain is a negative “cost”.
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Data Sources
• Repairs and maintenance
– Household expenditure surveys
• Insurance
– National accounts (premiums less claims)
• Taxes on dwellings
– Government accounts
• Consumption of fixed capital – dwelling stock and
depreciation rate
• Operating surplus – dwelling stock and rate of
return
• Capital gain expected – dwelling stock and rate of
inflation.
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Stock of dwellings (1)
• Consumption of fixed capital and operating surplus
require an estimate of the stock of dwellings at current
market prices.
• SNA recommends the Perpetual Inventory Method.
• An alternative is a short-cut method that only requires:
– Number of dwellings by type of dwelling
– Price of new dwellings.
• For own-constructed houses, the new price is the time
taken to build it times the current average wage of
unskilled labour
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Stock of dwellings (2)
• Remember that what we need is the current
market value of the stock of dwellings.
• To get this we assume that:
– Growth of dwellings since the census equals the
population growth rate.
– Average current market price of all the dwellings of a
particular type equals half the price of a newly-built
dwelling.
• This second assumption in turn assumes that:
– Prices of dwellings fall by the same amount each year; and
– The stock of dwellings is stable – neither increasing nor
decreasing.
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Consumption of Fixed Capital and Net
Operating Surplus
• Geometric depreciation
– Multiply the capital stock by D / T where D is the declining
balance rate and T is the service life
• Examples:
– if the service life is 70 years and D is set at 1.6, the annual
depreciation rate is D / T = 0.02
– if the service life is only 8 years and D is set at 1.6,the
annual depreciation rate is D / T=0.2.
• Net operating surplus could be calculated using:
– 0.025 for modern dwellings
– 0.000 for traditional dwellings
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Subsistence
• The SNA production boundary covers
production for own use of all goods.
• Here we will consider the two type of goods,
which are important in low income countries
with a large farming sector:
– Crops
– Livestock products
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Food crops (1)
• Estimates of subsistence crop output and
consumption should cover the main food
crops. In many countries, 3 or 4 crops may
account for 90% of the total.
• The SNA does not require separate estimates
for subsistence output and subsistence
consumption.
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Food crops (2)
• All crop production is valued at basic price. All crop
consumption is valued at purchasers’ prices.
• Purchasers’ prices are the same as basic prices for
subsistence consumption, so if you are valuing total
consumption of, say, maize or cassava, you should
use a weighted average of basic and purchasers
prices.
• The weights are the subsistence
and market share respectively.
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Livestock products
• The main livestock products are:
– eggs from chickens and guinea fowl;
– meat from animals and fowl;
– milk from cows, camels, goats, sheep, yaks, horses
and buffaloes.
• For each type of animal that is important in your
country you will need an estimate of:
– the total numbers of animals or birds
– rates of production or slaughter
– basic and purchasers’ prices as in the case of crops.
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Estimating Building and Construction
by the mark-up method (1)
• Basic data: cement, bricks, building steel, …
• Value of construction output equals:
– Measured intermediate inputs
– Plus mark-up for unmeasured intermediate inputs
– Plus mark-up for labor inputs
– Plus mark-up for operating surplus
– Plus mark-up for product taxes
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Estimating Building and Construction
by the mark-up method (2)
• Data Sources
– Production data
– Imports
– Analysis of a sample of construction projects to determine
mark-ups. Public works departments will have some of this
information.
• When to use the mark-up method
– This method can be used to obtain a bench-mark estimate
although direct survey information is usually better.
– More often, the mark-up method is used to update a
bench-mark estimate based on more accurate survey data.18
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Commodity Flow Estimates of GFCF
Imported Machinery and Equipment
• In many countries, most machinery and equipment is
imported.
• Only a few countries – Germany, USA, Japan, China,
Russia, France, India, Brazil for example - have
developed an industrial base capable of producing
machine tools, motor vehicles, construction equipment
and so on.
• Most countries import their machinery from a limited
number of producing countries.
• If you are one of these, your import statistics are the
starting point for estimating GFCF in machinery and
equipment.
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Worksheet for GFCF in Imported Machinery
and Equipment
Transport
equipment
Other
machinery
and
equipment
C.i.f. value of imports
+ Customs duties
+ VAT or other product taxes
+ Trade margins
+ Transport costs
+ Installation costs
= Gross Fixed Capital Formation
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What have we learned?
• The labor force or “Italian” method is one way to
cover small unincorporated enterprises. Many
countries with a large informal sector now use it.
• The dwelling services provided by all dwellings must
be included in the GDP. Estimates can be based on
costs rather than on rents actually paid.
• For subsistence, focus on the main food crops and
livestock products. Try to get the totals right: the
split between market and subsistence is interesting
but not essential.
• GFCF should ideally be based on expenditure
surveys of producers but the mark-up method is
sometimes used for construction and a commodity
flow method for imported machinery.
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