National accounts

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National accounts
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National accounts or national account systems (NAS) are the implementation of complete and consistent accounting techniques for measuring the economic activity of a nation. These include detailed underlying measures that rely on double-entry accounting. By construction such accounting makes the totals on both sides of an account equal even though they each measure different characteristics, for example production and the income from it. As a method, the subject may be termed national accounting or, more generally, social accounting.[1] Stated otherwise, national accounts as systems may be distinguished from the data associated with those systems.[2] While sharing many common principles with business accounting, national accounts are based on economic concepts.[3]

Scope

National accounts broadly present output, expenditure, and income activities of the economic actors (corporations, government, households) in an economy, including their relations with other countries' economies, and their wealth (net worth). They present both flows (measured over a period) and stocks (measured at the end of a period), ensuring that the flows are reconciled with the stocks. As to flows, the national income and product accounts (in U.S. terminology) provide estimates for the money value of income and output per year or quarter, including GDP. As to stocks, the 'capital accounts' are a balance-sheet approach that has assets on one side (including values of land, the capital stock, and financial assets) and liabilities and net worth on the other, measured as of the end of the accounting period. National accounts also include measures of the changes in assets, liabilities, and net worth per accounting period. These may refer to flow of funds accounts or, again, capital accounts.[1]

There are a number of aggregate measures in the national accounts, notably including gross domestic product or GDP, perhaps the most widely cited measure of aggregate economic activity. Ways of breaking down GDP include as types of income (wages, profits, etc.) or expenditure (consumption, investment/saving, etc.). Measures of these are examples of macro-economic data.[4] Such aggregate measures and their change over time are generally of strongest interest to economic policymakers, although the detailed national accounts contain a rich source of information for economic analysis, for example in the input-output tables which show how industries interact with each other in the production process.

National accounts can be presented in nominal or real amounts, with real amounts adjusted to remove the effects of price changes over time.[5] A corresponding price index can also be derived from national output. Rates of change of the price level and output and the may also be of interest. An inflation rate (growth rate of the price level) may be calculated for national output or its expenditure components. Economic growth rates (most commonly the growth rate of GDP) are generally measured in real (constant-price) terms. One use of economic-growth data from the nationl accounts is in growth accounting across longer periods of time for a country or across to estimate different sources of growth, whether from growth of factor inputs or technological change.[6]

The accounts are derived from a wide variety of statistical source data including surveys, administrative and census data, and regulatory data, which are integrated and harmonized in the conceptual framework. They are usually compiled by national statistical offices and/or central banks in each country, though this is not always the case, and may be released on both an annual and (less detailed) quarterly frequency. Practical issues include inaccuracies from differences between economic and accounting methodologies, lack of controlled experiments on quality of data from diverse sources, and measurement of intangibles and services of the banking and financial sectors.[7]

Two developments relevant to the national accounts since the 1980s include the following. Generational accounting is a method for measuring redistribution of lifetime tax burdens across generations from social insurance, including social security and social health insurance. It has been proposed as a better guide to the sustainability of a fiscal policy than budget deficits, which reflect only taxes minus spending in the current year.[8] Environmental or green national accounting is the method of valuing environmental assets, which are usually not counted in measuring national wealth, in part due to the difficulty of valuing them. The method has been proposed as an alternative to an implied zero valuation of environmental assets and as a way of measuring the sustainability of welfare levels in the presence environmental degradation.[9]

Macroeconomic data not derived from the national accounts are also of wide interest, for example some cost-of-living indexes, the unemployment rate, and the labor force participation rate.[10] In some cases, a national-accounts counterpart of these may be estimated, such as a price index computed from the personal consumption expenditures and the GDP gap (the difference between observed GDP and potential GDP).[11]

Main components

The presentation of national accounts data may vary by country (commonly, aggregate measures are given greatest prominence), however the main national accounts include the following accounts for the economy as a whole and its main economic actors.

• Current accounts:
production accounts which record the value of domestic output and the goods and services used up in producing that output. The balancing item of the accounts is value added, which is equal to GDP when expressed for the whole economy at market prices and in gross terms;
income accounts, which show primary and secondary income flows - both the income generated in production (e.g. wages and salaries) and distributive income flows (predominantly the redistributive effects of government taxes and social benefit payments). The balancing item of the accounts is disposable income ("National Income" when measured for the whole economy);
expenditure accounts, which show how disposable income is either consumed or saved. The balancing item of these accounts is saving.
• Capital accounts, which record the net accumulation, as the result of transactions, of non-financial assets; and the financing, by way of saving and capital transfers, of the accumulation. Net lending/borrowing is the balancing item for these accounts
• Financial accounts, which show the net acquisition of financial assets and the net incurrence of liabilities. The balance on these accounts is the net change in financial position.
• Balance sheets, which record the stock of assets, both financial and non-financial, and liabilities at a particular point in time. Net worth is the balance from the balance sheets (United Nations, 1993).

The accounts may be measured as gross or net of consumption of fixed capital (a concept in national accounts similar to depreciation in business accounts).

History

The original motivation for the development of national accounts and the systematic measurement of employment was the need for accurate measures of aggregate economic activity. This was made more pressing by the Great Depression and as a basis for Keynesian macroeconomic stabilisation policy and wartime economic planning. The first efforts to develop such measures were undertaken in the late 1920s and 1930s, notably by Colin Clark and Simon Kuznets. Richard Stone of the U.K. led later contributions during World War II and thereafter. The first formal national accounts were published by the United States in 1947. Many European countries followed shortly thereafter, and the United Nations published A System of National Accounts and Supporting Tables in 1952.[1][12] International standards for national accounting are defined by the United Nations System of National Accounts, with the most recent version released for 2008.[13]

In Europe the worldwide System of National Accounts has been adapted in the European System of Accounts (ESA), which is applied by members of the European Union and many other European countries. Research on the subject continues from its beginnings through today.[14]

 Measures of national income and output System of Material Product Balance Official statistics United Nations System of National Accounts Penn World Table

Notes

1. ^ a b c Nancy D. Ruggles, 1987. "social accounting," The New Palgrave: A Dictionary of Economics, v. 4, pp. 377–82.
2. ^ United Nations, The System of National Accounts and National Accounts Data.
3. ^ Joel S. Demski, 2008. "accounting and economics," The New Palgrave Dictionary of Economics. Abstract.
4. ^ Referred to in the Journal of Economic Literature classification codes under JEL: C8 - Data Collection and Data Estimation Methodology and JEL: E01 - Measurement and Data on National Income and Product Accounts and Wealth.
• T. P. Hill, 2001. "Macroeconomic Data," International Encyclopedia of the Social & Behavioral Sciences, pp. 9111–9117. Abstract.
• François Lequiller and Derek Blades, 2006. Understanding National Accounts , OECD. Description and preview.
5. ^Amartya Sen, 1979. "The Welfare Basis of Real Income Comparisons: A Survey," Journal of Economic Literature, 17(1), pp. 1–45.
• D. Usher, 1987. "real income," The New Palgrave: A Dictionary of Economics, v. 4, p. 104.
6. ^ From The New Palgrave Dictionary of Economics, 2008, 2nd Edition, with Abstract links:
• "economic growth" by Peter Howitt and David N. Weil
• "growth accounting" by Francesco Caselli.
7. ^Oskar Morgenstern, 1963. On the Accuracy of Economic Observations, 2nd ed. ch. 16. Princeton.
• H. O. Stekler, 1964. [Review], Journal of the American Statistical Association, 59(307), pp. 965-967.
• J. Steven Landefeld, Eugene P. Seskin, and Barbara M. Fraumeni. 2008. "Taking the Pulse of the Economy: Measuring GDP." Journal of Economic Perspectives, 22(2), pp. 193–216. PDF link (press +).
From The New Palgrave Dictionary of Economics, 2nd Edition, with Abstract links:
• "intangible capital" by Daniel E. Sichel
• "national income" by Thomas K. Rymes.
8. ^The Economist, Economics A-Z, "Generational Accounting." Accessed 9 Aug. 2010.
• Jagadeesh Gokhale, 2008. "generational accounting." The New Palgrave Dictionary of Economics, 2nd Edition. Abstract and uncorrected proof.
• Laurence J. Kotlikoff, 1992. Generational Accounting: Knowing Who Pays, and When, for What We Spend. Free Press. Review extract.
9. ^ From The New Palgrave Dictionary of Economics, 2008, 2nd Edition, with Abstract links:
• "green national accounting" by Sjak Smulders
• "sustainability' by Daniel W. Bromley
• National Research Council, 1994. Assigning Economic Value to Natural Resources, National Academy Press. Chapter links.
10. ^ • Robert Topel, 2008. "unemployment," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
• Katharine Bradbury, 2008. "unemployment measurement," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
11. ^ Robert J. Gordon and Peter K. Clark, 1984, "Unemployment and Potential Output in the 1980s," Brookings Papers on Economic Activity, (2), pp. 537-568.
12. ^ André Vanoli, 2008. "national accounting, history of," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
13. ^ United Nations, System of National Accounts 2008-2008 SNA.
14. ^ National Bureau of Economic Research Book Series, 1937-2010. Studies in Income and Wealth, 71 v.

References

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