Output Intermediate consumption and Value added (production method) Part II. Supply and Use tables 31 October 2006 Output Intermediate consumption and Value added (production method) Piet Verbiest Intro zelf Doel en opbouw van deze module Mededelingen over de rest van de cursus Vragen en opmerkingen tijdens de les AGT van 1993 op P-serie niveau uitreiken Statistics Netherlands: National accounts in Practice

BASIC TERMINOLOGY

EXERCISE

Part II. Supply and Use tables 31 October 2006 PRODUCTION An ACTIVITY carried out under the control and responsibility of an institutional unit that uses INPUTS of labour, capital, and goods and services to produce OUTPUTS of goods and services Note: a purely natural process is not production; nor are windfall profits/losses; almost every other (economic) activity is! Statistics Netherlands: National accounts in Practice

Part II. Supply and Use tables 31 October 2006 PRODUCTION Included in SNA production are: fraud, underreporting illegal production goods produced by households for their own consumption goods and services supplied free to employees [income in kind] Statistics Netherlands: National accounts in Practice

Part II. Supply and Use tables 31 October 2006 PRODUCTION Excluded from SNA production are: All household activities that produce domestic or personal services for OWN final consumption within the same household, EXCEPT paid domestic staff and services of owner-occupied dwellings Examples: caring for children, the sick or elderly preparation of meals washing, cleaning small repairs etc. Statistics Netherlands: National accounts in Practice

Part II. Supply and Use tables 31 October 2006 PRODUCTION Why exclude certain household activities? self-contained, limited influence on the rest of the economy vast majority is not produced for the market > difficult to estimate values difficult to interpret: received and imputed income are not really comparable it would eliminate the concept of unemployment Statistics Netherlands: National accounts in Practice

Part II. Supply and Use tables 31 October 2006 PRODUCTION Market output Non-market output Statistics Netherlands: National accounts in Practice

Part II. Supply and Use tables 31 October 2006 PRODUCTION MARKET OUTPUT: The total value of goods and services sold at economically significant prices; goods and services bartered; goods and services used for payments in kind; goods and services supplied by one establishment to another within the same enterprise; changes in inventories of finished goods and work-in-progress intended for one of the above uses Statistics Netherlands: National accounts in Practice

Part II. Supply and Use tables 31 October 2006 PRODUCTION NON-MARKET OUTPUT : goods and services produced for own final consumption or gross fixed capital formation; goods and services supplied free, or at economically insignificant prices, to other institutional units; goods and services supplied by one non market establishment to another; changes in inventories of finished goods and work-in-progress intended for one of the above uses Statistics Netherlands: National accounts in Practice

Part II. Supply and Use tables 31 October 2006 NON-MARKET PRODUCERS Examples: government production, health services, cleansing services no value of output in market prices value of output is defined as sum of total costs (incl. consumption of fixed capital) -> net operating surplus is zero Statistics Netherlands: National accounts in Practice

Part II. Supply and Use tables 31 October 2006 NON-MARKET PRODUCERS Example Costs of: Energy 25 Renting 200 Office needs 150 Staff 4000 Consumption of fixed capital 100 Output 4475 Statistics Netherlands: National accounts in Practice

EXERCISE

PRODUCTION: Special Items

PRODUCTION VALUE OF TRADE Part II. Supply and Use tables 31 October 2006 PRODUCTION VALUE OF TRADE Production value = trade margin + sales of goods purchased for resale - purchases of goods for resale + change in inventories of goods for resale including normal losses due to: wastage theft = trade margin Statistics Netherlands: National accounts in Practice

VALUATION OF INVENTORIES Part II. Supply and Use tables 31 October 2006 VALUATION OF INVENTORIES SNA recommends Perpetual Inventory Method (PIM) for valuation of inventories Basic principles: additions to inventories are valued at prices of the moment of production or purchase withdrawals from inventories are valued at prices that would have been paid at the moment of withdrawal Statistics Netherlands: National accounts in Practice

EXERCISE

Intermediate Consumption

INTERMEDIATE CONSUMPTION Goods and services consumed as inputs by a process of production Points of attention: * delineation with fixed assets - small tools - intangible assets - military weapons - software

INTERMEDIATE CONSUMPTION Goods and services consumed as inputs by a process of production Points of attention: * delineation with value added - wages in kind - reimbursements - FISIM

Part II. Supply and Use tables 31 October 2006 INTERNAL DELIVERIES Internal deliveries within a kind- of-activity unit are not recorded Exceptions: adding to stocks/work in progress production for own final use Statistics Netherlands: National accounts in Practice

Value added (Components of value added: income method) Part II. Supply and Use tables 31 October 2006 Value added (Components of value added: income method) In the S+U table rows 49 + 50 Statistics Netherlands: National accounts in Practice

Part II. Supply and Use tables 31 October 2006 GENERATION OF INCOME ACCOUNT USES RESOURCES Compensation of employees - Value added Taxes on production minus subsidies on production Consumption of fixed capital BI= net operating surplus or mixed income TOTAL Statistics Netherlands: National accounts in Practice

Output Intermediate consumption and Value added Part II. Supply and Use tables 31 October 2006 Output Intermediate consumption and Value added Statistics Netherlands: National accounts in Practice