Regional Accounts THE CONTRACTOR IS ACTING UNDER A FRAMEWORK CONTRACT CONCLUDED WITH THE COMMISSION

Regional Accounts What are regional accounts? They are the “national accounts” for a region of a country They follow the same concepts and standards as the national accounts

Regional Accounts Regional accounts provide a regional breakdown of economic aggregate measures such as GVA. Tables on production by region show Size and growth of GDP and employment The character of each region in economic terms Which industries are important for each region The contribution by region to key national measures such as household spending

The importance of regional accounts Regions in the EU have a level of autonomy in decision-making which is supported by detailed regional accounts Regional accounts measures such as GDP per head are used in the allocation of taxes to generate revenue and subsidies to stimulate growth

Production in regions The tables on regional production show A) the level and growth of production and employment by region B) the contribution by region to national aggregates The role of industries in each region

Regional income Regional household income accounts show primary and disposable household income by region These accounts also show the sources and destiny of income amongst regions

Compilation Regional accounts are compiled on the basis of regional data collected directly where feasible Regional accounts are compiled also through national data with a regional split based on assumption Where data is spread by assumption, regional characteristics may not be captured nor feature in the accounts

Regional territory The regional territory is that part of a country designated as a region, including free zones, bonded warehouses and bonded factories The sum of such regional territories is not the complete economic territory, which also includes “extra-regio” territory

Regional territory The “extra-regio” territory of a country comprises A) the national air-space, territorial waters, and international waters over which the country has exclusive rights B) territorial exclaves – territories abroad such as embassies, military and scientific bases C) deposits of oil, natural gas etc., in international waters, worked by resident units

Nomenclature of Territorial Units for Statistics (NUTS) NUTS is a hierarchical system NUTS 1: 98 regions NUTS 2: 1,276 regions NUTS 3: 1,342 regions

NUTS purpose Socio-economic analysis of the regions NUTS 1: major socio-economic regions NUTS 2: basic regions for regional policies NUTS 3: small regions for specific analysis

NUTS uses Framing of EU regional policies Regions eligible for support from the cohesion policy have been defined at the NUTS 2 level

Units For the national economy, institutional units keep accounts which allow the recording of flows reflecting production, income, capital and financial transactions, other flows and balance sheets Records for local Kind of Activity Units (local KAU) show flows occurring in production and the use of goods and services

Institutional units Uniregional units – the centre of predominant economic interest is in one region E.g. households, enterprises, local KAUs Multiregional units have centres of predominant economic interest spread over more than one region E.g. Corporations, NPISHs, government

Impact of multiregional units on accounts Some transactions of multiregional units cannot be asigned to a region These transactions are typically distributive and financial So for multiregional units, balancing items such as saving and net lending can not be measured

Local KAUs and regional production Enterprises partitioned by location, produce through local units When a KAU is spread over regions, information only available at KAU level must be split to obtain regional accounts

Ancillary unit – special case If a local unit carrying out ancillary activities is statistically observable, or in a different location from the unit it serves, it is recorded as a separate unit and allocated to the industrial activity corresponding to its principal activity, in both national and regional accounts.

Methods of regionalisation Bottom-up methods Top-down methods A mixture of these two

Bottom-up Collect data from regional resident units and aggregate regional estimates Pseudo-bottom-up If production data is available at KAU level, and distribution indicators such as employment are available for local KAUs across different regions, then spread production measures according to indicators across regions

Top-down Distribute a national measure across regions, using an indicator which reflects the likely distribution of the national measure. Specific industries such as construction, energy production and distribution, communication networks, transport and financial intermediation pose difficulty in regional allocation.

Consistency with national accounts Where bottom-up or mixed methods are used to estimate regional national accounts measures, the sum of regions are pro-rated to be consistent with national accounts Close liaison is required between regional and national accounts compilation so that bspecial cases are handled in a consistent manner

Three approaches to measuring regional GDP The production approach is feasible, building from the bottom up using survey information with location in dicators The income approach can be integrated with the production approach through the use of compensation of employment measures Information on operating surplus is not usualy available by industry and region

Three approaches to measuring regional GDP The expenditure approach is not possible due to the lack of direct information on inter-regional sales and purchases, and imports and exports It is therefore not possible to use a supply-use framework to ensure consistency between P, E and I for regional estimates of GDP at NUTS 2 level

FISIM Where FISIM cannot be allocated to regional industries on the basis of stocks of financial assets and liabilities, a second best indicator for allocation must be used, such as regional estimates of GVA

Employment, Compensation of Employment (CoE) Regional employment is defined and measured consistently with the principles governing employment and residence for the national economy CoE is allocated to local KAUs according to employment, in the absence of direct information.

Transition from regional GVA to regional GDP Taxes and subsidies on products are allocated to regions according to relative size of GVA valued at basic prices Where different tax regimes exist between regions, this information should be used as a first broad allocation

Volume growth rates for regional GVA This is difficult because a) information on regional price change is usually not available b) there is no supply-use framework available at regional level to ensure a consistent approach

Volume growth rates for regional GVA Best possible approach – deflate regional value added by industry using national price indicators The resulting estimates are not robust, due to the obvious issues of regional variations in structures, product and industry homogeneity, and prices

Regional accounts - assessment It is difficult to compile regional accounts without costly expansion of national surveys to ensure that robust regional estimates can be made In the absence of such information, only production estimates of GVA and so GDP can be made with sufficient confidence to provide a sound basis for policy use such as the allocation of support funds in Europe