Institutional units Martin Kellaway National Accounts in Practice – Advanced course Luxembourg, 2-11 October 2018 THE CONTRACTOR IS ACTING UNDER A FRAMEWORK CONTRACT CONCLUDED WITH THE COMMISSION

Contents The national economy Institutional units Definition of units

Limits of national economy The national economy is defined in terms of resident institutional units. Resident units are known as resident units, irrespective of nationality, legal form or presence on the economic territory at the time they carry out a transaction.

Limits of national economy An institutional unit is considered resident in a country when it has its centre of predominant economic interest in the economic territory of that country, over a sufficiently long period (one year of more) May be different from the legal form used in statistical inquiries (e.g. enterprises, holding companies, government departments, households)

Limits of national economy A country’s economic territory, ESA (2.05) The area within the ‘governed’ borders Including own embassies, military settlements abroad, its enclaves Excluding foreign embassies, military settlements and EU Excluding extraterritorial enclaves of others

Enclaves Examples San Marino, Vatican, West Berlin; Alaska, Kaliningrad semi-enclaves Map shows the Belgian exclaves of Baarle-Hertog in the Netherlands, which, in turn, has Dutch enclaves within it

Limits of national economy Residency - special cases Cross border workers (excluded) Cross border seasonal workers (excluded) Tourists (excluded) Branch office (included) Real estate – land and buildings - owned by non-residents (included)

Definition of an Institutional unit An institutional unit is an economic entity characterised by decision making autonomy in the exercise of its principle function It also has, or is possible to compile, a complete set of accounts (ESA 2.12)

Definition of an Institutional unit Entitled to own goods or assets in its own right Able to take economic decisions and engage in economic activities Able to incur liabilities on its own behalf and is accountable at law (ESA 2.13)

Institutional units Institutional unit is the smallest centre of economic decision making Institutional units are allocated to institutional sectors

Institutional units Institutional units: exceptions include: Households (fails the accounts test, but deemed to have autonomy) Notional resident units Head offices and holding companies (deemed a unit separate from its subsidiaries) Quasi corporations (fail 2.12 tests but constructed as units)

Quasi-corporations Legally dependent Behaves like corporation (produces mainly ‘market output’) Can compile complete set of accounts Although doesn’t have autonomy, it is deemed to do so, so that the market activity/behaviour can be separated from the household/government non-market part