Transcript Keynote address: GDP Using the Income Approach

GDP Using the Income Approach:
the U.S. Experience
Brian C. Moyer
International Workshop on Household Income, Consumption, and
Full Accounting of the Household Sector
March 26-28, 2012
www.bea.gov
Beijing, China
Measuring GDP
 Expenditures approach
GDP = C + I + G + (X-M)
 Income approach
GDP = Compensation of Employees +
Gross Operating Surplus + TOPI less Subsidies
 Production or “value added” approach
GDP = Gross Output - Intermediate Inputs
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Percent change
GDP by Expenditures and Income
GDP by Expenditures
GDP by Income
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Income approach
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Components of income
 Compensation of Employees
 Wages and salaries
 Employer contributions to pension and insurance funds
 Gross Operating Surplus
 Corporate profits, proprietors’ income, etc.
 Consumption of fixed capital
 Taxes on Production and Imports less Subsidies
 Federal excise taxes; State and local sales taxes
 Subsidies: grants by government to businesses and
government enterprises
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Source data
 Administrative data
 Mostly data collected for non-statistical purposes
 Financial statements
 Regulatory data
 Tax agencies
 Utilize a wide range of concepts and definitions
that may differ significantly from those used in
the national accounts
 Scope and coverage may differ over time because
of changes in business accounting and tax rules
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Adjustments to source data
 Significant adjustments are required to ensure
coverage and consistency with national accounts
concepts
 Misreporting adjustments
 Inventory valuation adjustments
 Adjustments to exclude capital gains and losses
 Capital consumption adjustments
 Adjustments to industry classifications
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Nonfarm proprietors’ income
of dollars
Billionsof
Billions
dollars
NonfarmProprietors'
Proprietors’ Income
TotalTotal
Nonfarm
Income
Compared to Misreported Income
compared to Misreported Income
800
600
400
200
0
1982
1988
Nonfarm proprietors' income
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2001
Misreported income
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Corporate profits
Percent Change of Profits Measures
60%
40%
Y/Y Percent Change
20%
0%
-20%
-40%
-60%
-80%
-100%
1999
2000
2001
2002
2003
2004
2005
2006
2007
Year
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S&P Operating Earnings
NIPA Profits (current production)
SOI (Total Receipts less Total Deductions)
QFR Profits (Mining,MFG,Trade)
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Wages and salaries
Percent Change of Wages and Salaries
[Growth rts.]
10
8
6
4
2
0
-2
1999
2000
2001
2002
2003
2004
2005
2006
2007
Census, County Business Patterns (CBP)
BLS Qtrly Census of Employment & Wages (QCEW)
IRS, SOI Wages & Salaries
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Wages and salaries
Growth Rates of Real Value Added, 2007
QCEW
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CBP
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Timing of source data
GDP by Income
37% based on
early source data
63% based on
judgmental trend
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GDP by Expenditures
23% based on
judgmental trend
77% based on
early source data
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Timing of source data
GDP by Income source data - estimates for 2007
GDP by Income
Compensation of employees
Wages and salaries
Nonsupervisory & production workers
Supervisory/nonproduction workers
Government
Supplements
Taxes on production and imports, less subsidies
Property taxes
Other
Net interest and misc. payments
Business current transfer payments
Proprietors' income
Rental income of persons
Corporate profits
Current surplus of government enterprises
Consumption of fixed capital
Total
Percent based on early source data that are
conceptually consistent with annual/benchmark data
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2007
(billions)
14,092.5
7,863.6
6,409.7
2,411.4
2,909.2
1,089.1
1,453.8
973.9
396.3
577.6
Judgmental
Early source
trend
data
(percent of GDP by Income)
20.6%
10.3%
2.8%
964.1
102.2
6.8%
0.7%
1,096.4
7.8%
144.9
1.0%
1,193.9
-6.6
1,760.0
0.0%
12.5%
62.6%
Description of early source data / estimation method
17.1% BLS Current Employment Statistics: payroll survey
Judgmental trend extrapolation based on payroll employment
7.7% BLS CES payroll survey employment and ECI
Judgmental trend extrapolation
Judgmental trend extrapolation
4.1% Federal Monthly Treasury data; Census data for sales taxes
FDIC data for commercial banks; judgmental trend
extrapolation based on interest rates for most of the remainder
Judgmental trend extrapolation
Judgmental trend extrapolation based on BLS payroll data,
Census data, and other indicators
Mixture of actual source data and judgmental trend
extrapolation
Census Quarterly Financial Report, FDIC, and Compustat
8.5% data
Judgmental trend extrapolation
Judgmental trend extrapolation based on BEA capital stocks
37.4%
11.8%
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Statistical discrepancy
 Both GDP by income and GDP by expenditures
have measurement strengths and weaknesses
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Consistency with economic concepts
Source data timing
Consistency with benchmark data
Availability of corresponding price measures
 GDP by Expenditures = GDP by Income +
Statistical Discrepancy
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Income and Production approaches
 Income approach
GDP = Compensation of Employees +
Gross Operating Surplus +
TOPI less Subsidies
 Production approach
GDP = Gross Output - Intermediate Inputs
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Income and Production approaches
 Value addedi = (Compensationi + Gross
Operating Surplusi + TOPI less Subsidiesi) =
(Gross Outputi – Intermediate Inputsi)
 GDP = ∑i Value addedi
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Supply-Use framework
INDUSTRIES
Mining and
Construction
Manufacturing
Trade and
Transportation
Utilities
FINAL USES
Finance,
Insurance, and
Real Estate
Other
Personal
Consumption
Expenditure
Private Fixed
Investment
Change in
Private
Inventories
Net Exports
Government
Consumption
and Investment
Total
Commodity
Output and
Value Added
Mining and
Construction
COMMODITIES
Manufacturing
Trade and
Transportation
Utilities
Finance,
Insurance, and
Real Estate
Other
VALUE ADDED
Compensation
Taxes on
Production and
Imports
Gross
Operating
Surplus
Total Industry Output and
Final Uses
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Quality weighting
 Reliability indicators assigned to components
of intermediate inputs and gross operating
surplus by industry—in most cases,
coefficients of variation
 Less reliable components adjust more; more
reliable components adjust less
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Quality weighting
Income-based
Combined
Production-based
59,000
60,000
61,000
62,000
63,000
64,000
65,000
66,000
67,000
Value added (Millions of dollars)
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Looking forward …
 Research on combining GDP by expenditures and
GDP by income based on reliability of underlying
source data
 Research on the role of capital gains and losses in
financial profits
 Improved consistency across source data: data
synchronization
 New Quarterly GDP by industry data based on
the Income and Production approaches
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