Transcript GDP exhaustiveness - African Centre for Statistics

United Nations Economic Commission for Africa
African Centre for
Statistics
Handbook on Supply and Use Table: Compilation,
Application, and Good Practices
Chapter 9 - GDP exhaustiveness
Outline of Presentation
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The challenge of GDP exhaustiveness
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Activities usually under-reported or not reported
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Causes of under-estimation of GDP
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Consequences of under-estimation of GDP
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The Eurostat tabular approach to GDP exhaustiveness
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The OECD handbook on measuring non-observed
economy
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Informal sector and informal employment
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The challenge of GDP exhaustiveness
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GDP measure should take into account all
economic activities undertaken in the economy
that are included within the production boundary
of SNA.
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Ensuring the exhaustiveness of GDP is one of the
most important challenges faced by national
accountants.
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Activities usually under-reported or not
reported
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Informal activities
Illegal activities
Own account construction of dwellings and farm
buildings
Agricultural produce for own consumption
Services of owner occupied dwellings
Paid domestic servants
Wages paid in kind
Local administrative units (at village or block level).
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Other causes of under-estimation of GDP
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Defective sampling frames, especially due to the
failure to keep business registers up to date.
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Non-response.
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Under-reporting by establishments/enterprises.
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Consequences of under-estimation of GDP
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Loss of international comparability of the data
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Wrong policies resulting from wrong economic
or financial parameters
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Incorrect estimation of GDP growth rates
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Distorted PPPs
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The Eurostat tabular approach to GDP
exhaustiveness
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The Eurostat tabular approach to GDP
exhaustiveness is recommended for ICP 2001
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It provides a consistent and complete conceptual
framework by classifying adjustments into seven
types of “non-exhaustiveness”
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N1 ‐ Producer deliberately does not register
(underground activity)
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The producer does not register in order to avoid
tax and social security obligations or to avoid
losing some social benefits.
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Adjustment methods: labor inputs (from
household-based labor force surveys), commodity
flows and supply-use tables.
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N2 ‐ Producer deliberately does not register
(illegal activity)
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The producer deliberately fails to register because
he is involved in illegal activities such as
prostitution, sale of stolen goods, dealing in
drugs, smuggling, illegal gambling, etc.
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The methods that can be used to estimate the
adjustments are the quantity-price method, unit
per input or use, and expert judgment.
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N3 ‐ Producer not required to
register
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Such producers are not required to register because they
do not have any market output or it is below a set
threshold.
No adjustment is necessary if the estimation method for
a particular activity (or survey) implicitly takes account
of the non-registered activity.
The methods that can be used to estimate adjustments
are household expenditure surveys, building permits,
commodity-flow methods, administrative data and time
use surveys.
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N4 ‐ Legal producers not surveyed
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Legal producers who may be registered can still be excluded
from statistical surveys. For example:
– The producer may be newly registered and not yet recorded on the
business register
– The producer may be excluded from survey frames because classification
data used in developing the frames is wrong
– There may be a size cut-off that precludes the producer from being
selected to participate in a particular survey.
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The methods that can be used to estimate adjustments are
surveys of the quality of the business register, a review of the
lags involved in update procedures and whether they change
over time, or cross checking the business register against other
administrative sources of businesses.
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N5 - Registered entrepreneurs not
surveyed
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Registered entrepreneurs may not be recorded in the business
register for many reasons:
– Deliberately
– because the register updating sources do not include details of such
persons.
– They may be excluded from statistical surveys either because of errors in
details recorded or because of the small size of their individual activities.
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The methods that can be used to estimate adjustments are
surveys of the quality of the register, cross-checking against
other administrative sources (e.g. income tax statements) or via
specialized surveys.
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N6 ‐Misreporting by producers
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Misreporting involves under-reporting gross output
and/or over-reporting intermediate consumption in order
to avoid paying income tax, other taxes such as value
added tax (VAT), or social security contributions.
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The methods that can be used to estimate adjustments
are data from tax audits, comparing average salaries
and profits with similar businesses, comparing
input/output ratios with those of similar businesses,
special surveys and expert judgment on the accounting
relationships expected to be observed in such businesses.
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N7 ‐ Other statistical deficiencies
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This category can be divided into two parts:
– Data that are incomplete or cannot be directly collected
from surveys
– Data that are incorrectly compiled during survey
processing.
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The items that should be considered in determining the
adjustments to be made include how non-response was
taken into account, the extent to which wages and
salaries were paid in kind, production for own final use
by market producers, tips, valuation techniques and
adjustments for accruals.
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The OECD handbook on measuring
non-observed economy
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Non-observed activities are those that are missing from the
basic data used to compile the national accounts because they
are underground, illegal, informal, household production for
own final use, or due to deficiencies in the basic data
collection.
The 5 components of the NOE mentioned in the handbook are:
– Economic Underground
» (1) Underground Production
» (2) Illegal Production
» (3) Informal Production
– (4) Household Production for own final use
– (5) Statistical Underground
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Informal sector and informal economy
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Availability of separate data on employment and output in the
informal sector is important for policy purposes, besides
helping in measuring the GDP exhaustively.
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The term ”informal sector” is used to denote tiny units,
engaged in the production of goods and services but whose
activities were not recognized, recorded, protected or regulated
by the public authorities
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Informality of employment is characterized by absence of
contracts, social protection, entitlement to certain employment
benefits and not being subject to labour legislation or taxation
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The informal employment comprises informal jobs both in
informal and formal enterprises and in households.
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Characteristics of the informal sector
(15th ICLS and 1993 SNA)
The broad characteristics of the informal sector outlined in 15th
ICLS and 1993 SNA are that these are:
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Private Un-incorporated Enterprises owned by households: (i)
Own-account enterprises (ii) Enterprises of employers
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Units for which no complete accounts are available that would
permit a financial separation of the production activities of the
enterprise from other activities of its owners;
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Produce at least some of their goods or services for market
(sale or barter)
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Produce goods and services using labour as input
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Characteristics of the informal sector
(15th ICLS and 1993 SNA) (cont.)
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Refers to a group of production units based on their
characteristics, irrespective of:
– (i) kind of workplace where the productive activities are carried out
– (ii) extent of fixed capital assets used
– (iii) duration of the operation of the enterprise
– (iv) operation as a main or secondary activity of the owner
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The employment size of the enterprise is below a certain
threshold (to be determined according to national
circumstances);
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And/or not registered under specific form of national
legislation.
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Presenting data on informal sector and
informal employment
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It is not possible present a full sequence of accounts for the
informal sector, according to 2008 SNA.
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However, since the informal sector comprises a group of
production units engaged in industrial activities, it is possible to
present the production and generation of income accounts, in
the same manner as these accounts are compiled for activities.
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The 2008 SNA recommends that where possible two
supplementary tables should be prepared:
– One covering production and the generation of income
– One covering employment.
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Presenting data on production and
generation of income of informal sector
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Production
– of which for own use
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Intermediate consumption
Value added
Compensation of employees
Gross mixed income
Consumption of fixed capital
Net mixed income.
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Presenting data on informal
employment
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Employment in the informal sector
– formal jobs
– informal jobs
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Informal employment outside the informal sector
– in the formal sector
– in other household unincorporated enterprises.
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Direct approach to measuring activities
undertaken in the informal economy
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Direct approach
Data on output are collected from the informal
sector enterprises through the establishment
surveys or mixed household-enterprise surveys
Generally, the production approach is considered
the best approach to estimate informal sector
value added.
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Indirect approach to measuring activities
undertaken in the informal economy
Suggested indirect approach: the labour input method. It
involves three steps:
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obtaining estimates of the supply of labour input to GDP by
kind of economic activity and size of enterprise (from LFS for
ex.);
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obtaining estimates of output per unit of labour input and value
added per unit of labour input for the same activity and size
breakdown from regular or special purpose enterprise survey;
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multiplying the labour input estimates by the per unit ratios to
get output and value added for the activity and size categories.
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Comments and suggestions
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Very informative and well-explained chapter
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Add practical examples for the 7 types of nonexhaustiveness (Eurostat tabular approach)?
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Questions for discussion
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Advantages and disadvantages of direct vs indirect
methods for estimation the production of informal
sector?
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Differences between SNA93 and SNA2008
recommendations for the treatment of informal
sector?
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Thank you!
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