Transcript NOE - United Nations Economic and Social Commission for Western

Exhaustive Measurement of Economy
ESCWA/UNSD Expert Group Meeting on National Accounts
12-14 May 2009, Cairo, Egypt
Gulab Singh
UN Statistics Division
1
Introduction
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Good quality national accounts are vital for
economic policy making and research.
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An important aspect of their quality is the extent to
which they cover all economic activities.
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Exhaustive coverage is difficult to achieve because
of the wide range of economic activities, some of
which are deliberately concealed from observation
by those responsible for them
Lack of coverage causes problems for users both in
terms of levels and trends
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Levels
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Trends
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GDP and other data downward biased – inaccurate
impression of economy
Great significance in situations - monetary contributions
made/received by a country depend on its GDP or when
poverty is measured by GDP per head etc.
Biases in trend estimates can be expected if the economic
activities missing from GDP grow at different rates from
those included
For National Accountants, lack of coverage causes
imbalances in the internal consistency of the accounts
In measuring the activities within 2008 SNA
production boundary exhaustively, the 5 problem
areas that are most likely to be non-observed are:
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Underground
Illegal
Informal sector
Household production for self consumption
Deficiencies of basic data collection programme.
[OECD manual (2002) on Non-Observed Economy (NOE)]
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Clearly, the NOE problem areas are not mutually
exclusive.
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Activities not included in the basic data because
they are in one or more of these problem areas are
collectively said to comprise the NOE.
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Measurement of NOE involves action on two fronts:
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Improvements in direct measurement by the data
collection programme, resulting in fewer nonobserved activities and hence fewer non-measured
activities; and
Improvements in indirect measurement during
compilation of the national accounts, resulting in
fewer non-measured activities.
1. Underground Production
Certain economic activities which are legal are
deliberately concealed from public authorities for
the following reasons
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Avoid payment of taxes
Avoid payment of social security contributions
Avoid meeting legal standards –min wages
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Borderline between underground and illegal
production is not entirely clear
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SNA rule of thumb
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Underground activities are those not complying with
administrative rules,
Illegal activities are associated with criminal
behaviour
For NA purposes precise demarcation is not
required
2. Illegal Production
All illegal activities that fit the characteristics of
transactions are treated the same way as legal
activities
Two categories of illegal production included in
SNA production boundary
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Production of goods and services whose production, sale
or mere possession is forbidden by law; and
Legal activities undertaken by unauthorized producers
Differences in the boundary between countries, or
changes in the boundary within a country over
time, can cause inconsistencies
3. Informal Sector Production – discussed in separate
session
4. Household Production for own final use
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Production undertaken by household
unincorporated enterprises exclusively for own final
use is not part of the informal sector
Some household production activities are on a very
small scale. Thus, SNA suggests a criterion of
significance for deciding whether or not to record
the production of a particular good. Only if the
amount produced is believed to be quantitatively
important in relation to the total supply of that
good in the country should it be estimated
5. Production Missed Due to Deficiencies in Data
Collection Programme
 Sometimes referred to as the statistical
underground
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Under coverage of enterprises. Enterprises, or parts of
them, are excluded from the data collection
programme though in principle they should have
been included - new unit, below size cut off,
misclassification
Non-response by enterprises. Enterprises are
included in the sample but no data are collected from
them and no imputation is made for the missing
observations.
Underreporting by enterprises. Data are obtained
from enterprises, but are misreported in such a way
as to underreport value added, or correct data are
received but are inappropriately edited or weighted.
Indirect methods of covering NOE in the
GDP estimate:
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Supply based approaches, including labour
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Demand based approaches;
Income based approaches;
Commodity flow approaches.
Labour Input Method (LIM) is the most
important procedure that has been use since
1950s to measure contribution of unorganised
sector to GDP.
input method;
The labour input method (LIM) of estimating
value added/output for an economic activity
or a group of economic activities consists
of:
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Obtaining an estimate of labour input from
Population Census and/or Labour Force Survey
(LFS);
Obtaining estimates of output or value added per
unit of labour input from Establishment Survey;
and
Multiplying the estimate of labour input by the
estimate of per unit value added/output to arrive
at an aggregate estimate of value added/output.
Country experiences for measuring the NOE
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Illegal, underground activities;
Own-account non-agricultural goods production
solely for own final use
Statistical underground
Informal sector enterprises (next session)
In the absence of up-to-date business
register, additional NOE problem area would
include
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‘new establishments’ that are born after the last
Economic Census and not registered with the
concerned authority.
Thank You