RELIABILITY CRITERIA FOR NATIONAL ACCOUNTS

The reliability of national accounts is determined by the adequacy of a great variety of data sources and estimating methods. This inquiry focuses on major conceptual and methodological problems, and while it does not solve the reliability problem, it provides a framework for reliability analysis and suggests criteria for the evaluation of results; it also assists the producers of national accounts in determining the major trade-offs between different areas of possible data improvement.     

DEVELOPMENT OF AN ALGORITHM FOR THE COMPILATION OF NATIONAL ACCOUNTS AND RELATED SYSTEMS OF STATISTICS*

The present article includes a proposal for a national accounts algorithm to be applied in the computerization of the national accounts compilation process. While aiming at the estimation and reconciliation of data from different statistical sources, it is based on the application of a linear programming technique applied to a system of identities and inequalities that define the accounting and analytical relations between the data categories of a national accounting framework. The technique is flexible in the sense that it can be used with any configuration of available statistical sources and data requirements of the national accounts. The algorithm is illustrated graphically with help of a simple example and thereafter applied to an extended but still simple national accounting scheme for Suriname with data for 1965 that was compiled by the author many years ago. As the present study is only a first step in the development of the algorithm, more work is needed to make it operational and the last section of the article includes suggestions about the direction of that further work.     

SOCIAL PROTECTION ACCOUNTS AND THEIR RELATIONSHIP TO THE NATIONAL ACCOUNTS

The development of social protection accounts is described and the relationship between social security and welfare expenditure (as recorded in social protection accounts) and expenditures in the national accounts is discussed. Proposals are put forward for achieving co-ordination between social protection expenditure and expenditure recorded in the national accounts, and these are illustrated by reference to Irish data. The future development of social protection accounts by the inclusion of fiscal benefits, which are not recorded in the national accounts, is also considered. Finally some references are made to the use of the social protection accounts and the development of data relating o the numbers of persons covered by social protection and the numbers of beneficiaries.     

PROBLEMS OF DETERMINING AND MEASURING THE RELIABILITY OF THE NATIONAL ACCOUNTS: HUNGARY'S EXPERIENCES

Economic realities can be described in national accounting only by certain approximative means and presumptions; therefore they cannot be measured with absolute accuracy. However, because of their great importance these investigations must fulfil as far as possible the reliability required for the economic control and planning of the national economy, in accordance with predetermined concepts and methods. The reliability of national accounting is favourable in Hungary, as they are based mostly (92 percent) on the bookkeeping data of enterprises, cooperatives and institutions. The bookkeeping system is uniform in all economic organizations, in conformity with central regulations, and it takes into account the demand of computations for national accounting. Despite these favourable conditions lesser or greater contradictions can be found in the national accounts every year. The absolute measure of the differences is not significant; however, if compared to the annual increase it results in uncertainty of 15 percent. The uncertainty is reduced by the fact that the sign of differences is the same every year. The author classifies the causes of uncertainty in national accounts into four groups: 1. problems of the time shift of the connected economic processes and of their accounting; 2. effect of the enterprise interests; 3. inadequacy of methodological regulation; 4. inaccuracy of data surveys and processing. The study deals with the special factors of inaccuracy occurring in constant price accounting. Inaccuracy of the most important aggregates, for instance that of the volume index of the national income, comes to 0.5-0.7 percent which results, in the case of a yearly 5 percent “real” increase in the index, in reliability limits of 10 to 15 percent. In the concluding part of the study the author points out that in Hungary the unexplored contradictions are not shown as “statistical discrepancy” but they are included in the various aggregates on the basis of considerations discussed in the study.     

PROBLEMS OF DETERMINING AND MEASURING THE RELIABILITY OF NATIONAL ACCOUNTS IN DEVELOPING COUNTRIES

Most developing countries have compiled national accounts on a regular basis only for the last few years. It has not yet been possible for them to collect many of the statistics necessary to obtain good coverage of their economic activities by methods which would generally be accepted as reliable. Consequently the checks on reliability imposed by the framework of the national accounts are often absent, and the accounts prepared contain many estimates of doubtful quality. These doubts can usually only be removed as statistics collected by better methods become available. This is proving to be a slow process, partly because of the shortage of trained statistical staff and the competing demands of social and demographic statistics and partly because of the inherent difficulties in collecting good statistics from small businesses and traditional households. The need to define traditional households as producers as well as consumers leads to our demanding extra information from this difficult sector. In addition it is often difficult for the national accounts statistician, and even more so for the user, to find out in the time available exactly how some of the statistics with which he is presented were obtained. When this cannot be done it is impossible to assess their reliability. Thus assessing the overall reliability of national accounts in developing countries for even a limited range of uses is at present largely a matter of personal judgment. The information necessary to make more objective assessments rarely exists and hence the problems which developed countries face in using such information are not yet within the experience of most developing countries.     

FINANCIAL OPERATIONS AND MONETARY STATISTICS: IMPROVED CONCORDANCE IN THE FRENCH NATIONAL ACCOUNTS

National accounts are a powerful means of coordinating different statistical systems. The better their classifications are adapted to the basic statistics or the information blocks one wishes to use, the better the national accounts play their part. This statement explains why, taking the opportunity of revising the whole system, French national accountants tried to improve the concordance between financial operation tables and monetary statistics. Other reasons leading to this attempt can be found in the dissatisfaction of users having to face different and inconsistent financial information such as the monetary statistics on one hand and the financial aggregates of the national accounts on the other; and even more reasons appear in the organizational field since those two statistical systems are issued by two neighbour services of the Banque de France, often depending on the same sources. Further, many propitious factors are converging at the same time: the French financial system is undergoing profound transformations originating as much in the behaviour of economic agents as in the law, and the statistical operations have to adapt to these changes. The national accounts will in the near future include balance sheets in which financial asset holdings are directly comparable to the money supply aggregates. In its first part our paper sets forth the detailed reasons for our attempts, the conditions in which it took place and the present results. We have reached a much better degree of consistency between the two systems, even if the final scheme has not yet been adopted in either the monetary field or in the field of national accounts. But an important question remains open about the durability of the harmonization: we think that it could be relatively uncertain because of the differences in the goals pursued by the two systems and the constraints which they face. That is why in the second part of the paper we tried to review the way such a pragmatic undertaking as ours could call into question the way in which financial operations are described in the system of national accounts. If one agrees with the present boundary between the real and the financial sphere, the articulation must remain somewhat elementary. But if one wants to revise the usual so-called dichotomy between financial and non financial phenomena, we think that a complete rebuilding of the conceptual framework of the accounts has to be done; this would necessitate a considerable amount of theoretical and practical work.     

A BALANCED SYSTEM OF NATIONAL ACCOUNTS FOR THE UNITED KINGDOM

This paper describes the construction of a disaggregated system of 262 national accounts for the U.K. economy in 1975. The objective is to remove the discrepancies between income, expenditure, production and financial estimates which occur in practice. This is done with the aid of a generalized least squares algorithm for adjusting national accounts with subjective estimates of reliability of the various account items. The balanced system of accounts provides the cross-section data base needed for the estimation of a consistent multisectoral dynamic model of the U.K. economy and yields the classification converters and input-output tables necessary for such a model.     

THE PRELIMINARY AND FINAL FIGURES OF THE DANISH NATIONAL ACCOUNTS

This paper compares preliminary estimates (available about four months after the close of the period to which they refer) with final estimates (available three years after the close of the period) for certain national accounting aggregates and some of their major components. It concludes that preliminary estimates are consistently low for gross domestic product, exports, and public consumption, whereas imports, private consumption, and gross capital formation may be either low or high. The best early estimates, in the sense of closest to the final figures, are those for gross domestic product, imports, and exports.     

CONCEPT AND DEFINITION OF INCOME IN THE NATIONAL ACCOUNTS

It is a truism that the national accounts have engendered their own concept of income which is different from other contexts such as business accounting, taxation or welfare analysis. Less known are the principles on which this income concept is based. This article is an attempt to specify such principles, investigating in particular the role of the transaction principle, and to derive an income concept therefrom. The crucial point of the argument is whether or not it is appropriate within the system of the national accounts to assign an income to sectors other than the households. The theory is applied to some practical questions which have been discussed in the process of the revision of the SNA.     

RELIABILITY OF THE QUARTERLY NATIONAL INCOME AND PRODUCT ACCOUNTS OF THE UNITED STATES, 1947–1971*

The reliability of the quarterly national income and product (NIP) accounts of the United States is examined from several standpoints. First, possible sources of error in the quarterly NIP accounts are explored, the most important being the lack of appropriate data, seasonal adjustment errors, sampling errors and biases, and the nature of the U.S. statistical system. Next, four ways of assessing the reliability of the accounts are considered. The most weight is given to measures of revisions in early estimates of the quarterly NIP aggregates. Results of previous studies of revisions are reviewed, and a summary of a major study of revisions for the period 1947–71 is given. The other ways of assessing reliability which are examined are the effect of errors on economic policy making, analysis of the statistical discrepancy, and expert judgment on sources and methodology. The degree of accuracy is judged to be generally sufficient for the policy decisions for which the NIP estimates are used. The early estimates of a quarter's change in GNP almost always distinguish whether the ultimate estimate will be large or small and will usually distinguish whether the ultimate estimate will be larger or smaller than the preceding quarter. While the accuracy of the estimates has generally been sufficient, the accuracy for 1965 was judged insufficient by policymakers. There is some evidence that errors have been reduced over time.     

PRICES AND PRICE ANALYSIS IN THE FRAMEWORK OF THE NATIONAL ACCOUNTS

The paper discusses the role of prices in the framework of the new System of National Accounts (SNA) in terms of three major uses: (1) deflation, (2) price indicators, and (3) price analysis. Following a brief review of the price and quantity measures required by the new SNA with its emphasis on deflation of commodity flows and input-output accounts, in addition to the more conventional deflation of final demand categories, the paper discusses some of the conceptual, methodological and data problems involved in implementing the various uses of prices in the new SNA. Implementing the use of prices as deflators depends, in part, on the concept of output selected (national versus domestic; gross versus net), and which of six concepts of valuation, ranging from purchasers'value to true factor cost, is used. Some of the difficulties in deflating nonmarket flows (e.g., interplant transfers) and industry value added, based on the double deflation method, are discussed. In concept price deflators, which have shifting weights, cannot be used as price indicators, which should have fixed weights. In practice, this is often disregarded and the deflators are used as price indicators. The paper support the SNA recommendation for the development of price indexes with fixed weights to be used as price indicators, in addition to the implicit price deflators. Research in the United States indicates that differences in weights can result in different price measures for various subperiods, components of demand and sector output. Periodic revisions in weights to provide more current fixed weights for price and quantity indexes in each subperiod may minimize the problem but it introduces a new problem—lack of comparability with the constant price tables in the SNA which have fixed weights for the entire period. The new SNA provides a comprehensive and integrated framework for price analysis including the analysis of the structure of aggregate price changes, the industrial origin of final demand prices, and the impact of price change in one sector of the economy on the rest of the economy. Some major gaps which need to be overcome in order to implement the use of the new SNA for price analysis include the development of industry capital stock estimates, separate estimates of proprietors’income, reconciliation of value added and distribution share estimates, and the development of a wide variety of information to supplement the conventional input-output tables in the SNA. Implementing the various objectives of price measures within the framework of the accounts will require a number of improvements in existing price measures and expanding the scope of coverage. “List” prices should be superseded by “transactions” prices and better techniques and data need to be developed to provide for quality adjustment of prices. Coverage will need to be expanded to include services, freight rates, trade margins, government expenditures, and also fill in gaps for many manufactured products. Finally, where possible, use of unit values as price indexes or deflators, e.g., imports and exports, should be replaced by direct price measures.     

ON THE TREATMENT OF TAXES AND GOVERNMENT IN THE NATIONAL ACCOUNTS

Framed in the context of the ongoing revision of the 1993 System of National Accounts (SNA), this note proposes a new presentation of the National Accounts. While it does not require new information, nor difficult calculations, it is suggested to be conceptually clearer and practically simpler. The changes concern the treatment of taxes and government in the national accounts which imply that: (i) GDP, measured at basic price, is now exactly the sum of all value added, which is split in the compensation of employees and an enlarged operating surplus; (ii) the two functions of government are clearly distinguished in a modified sequence of accounts, that is, as producing non-market services up to the allocation of primary income account, and then as redistributing the national income; and (iii) with a conventional allocation of government services and GDP broken down between market GDP and non-market GDP, households remain the only final consumer and the so called question of consumption subsidies is resolved.     

THE TREATMENT OF PENSIONS AND INSURANCE IN NATIONAL ACCOUNTS*

In the course of the nearly two decades since the revised SNA was developed, the role of pensions and insurance in the developed western economies has been significantly altered. The United Nations System of National Accounts (SNA) is not fully consistent in its treatment of pension and insurance transactions. This paper examines whether, in view of the changed institutional context, a modification of the SNA treatment of this complex of flows would be desirable. It investigates the impact on household income and saving of adopting a somewhat more consistent transactor/transaction approach for all pension and insurance transactions. Four main topics are covered: (1) social security, (2) private pensions, (3) life insurance, and (4) casualty insurance. Each is considered in terms of the treatment of contributions, the treatment of benefits, and the handling of reserves and the income generated by them. The same sorts of problem arise in all four cases.     

INCOME DISTRIBUTION STATISTICS IN LATIN AMERICA AND THEIR RELIABILITY

This paper is addressed to the question of how far income distribution statistics currently available in Latin America can be relied upon, either to assess the degree of inequality in the national distribution of income or to undertake comparisons between countries or over time. It gives a summary account of research carried out on Latin American data.
The sources available in Latin America for estimating income distributions are discussed. Concentrating the attention on household surveys conducted in various Latin American countries, an inventory of such surveys and their characteristics is offered, along with a detailed exposition of survey methods and income concepts used for estimating household income. Methods used for assessing the representativeness of samples are summarily reviewed. The case for comparing income data from household surveys and population censuses with national accounts estimates is put forward, along with the procedures and assumptions used for carrying out such comparisons. The relative discrepancy between the two sources is taken as indicative of the degree of underestimation of each type of income in each survey. An analysis of such discrepancies across the set of surveys considered gives clues on possible underestimation biases in measuring each type of income and total household income in different types of survey and in population censuses.
Differential effects on comparability of survey results call for appropriate methods of adjusting income distribution estimates to account for the missing incomes. A method for carrying out such an adjustment is applied to income distributions from a selected number of Latin American surveys. The results obtained provide an indication of how much difference it makes to use unadjusted or adjusted data to assess income concentration or to carry out comparisons over time or space.     

SELECTED PROBLEMS OF WELFARE AND PRODUCTION IN THE NATIONAL ACCOUNTS

A number of rather traditional problems relating to the estimation of the national accounts have been raised in the recent literature. This paper examines five of these problems from the point of view of a government statistician working within certain time and resource constraints. Credibility, comprehensibility, theoretical validity, cost and analytical usefulness are the criteria which should aid in deciding how to treat such matters as the extension of the boundaries of economic production, proposed changes in the categorization of both final and intermediate expenses, the treatment of "total" welfare and estimation relating to the so-called underground economy.     

THE TREATMENT OF INTEREST AND FINANCIAL INTERMEDIARIES IN THE NATIONAL ACCOUNTS OF AUSTRALIA

This paper is divided into two main sections. The first part summarises briefly the main points which have arisen in the lengthy debate over the treatment of banking intermediaries in the national accounts. The discussion emphasises the method adopted in the early Australian accounts when banks were treated in the same way as the general government. It is argued that this method is simpler and provides a more realistic account of the functions of banks than the current SNA proposal.
The second part of the paper examines the functions of banks in Australia. It uses data of interest and administration cost for separate banking institutions to examine the incidence of bank costs. It is concluded that the costs do not fall on borrowers or lenders but are a charge in providing a communal service in the establishment and maintenance of the financial system.