Additivity of Deflated Input–Output Tables in National Accounts

Input–output tables deflated by chained prices indices are not additive over product rows. This paper discusses the reasons and suggests a remedy. The new method proposed is based on a distinction, in concept, between ‘real value’, on the one hand, and variation in ‘volume’, on the other. The first corrects for the monetary variation of the unit of account resulting from inflation, while the latter isolates the variation of one product price relative to the other products, caused by the forces of supply and demand on each individual commodity market. An example of the resulting growth analysis is compiled for the Dutch economy between years 1990 and 2000.     

Accounting for international trade in value added: a comment on the OECD–WTO project

ABSTRACT

In the global economy of today, global value-added chains allow firms and countries to take apart the production process and do the part they are best at. In response to this new reality, OECD and WTO have launched a common statistics project of the ‘OECD–WTO Trade in Value-Added (TiVA) Database’. The database links national input–output tables with bilateral trade data to develop inter-country input–output tables that allow compiling, and revealing such chains. Its data are actual nominal values compiled at current exchange rates. The paper takes issue with that choice. Recalling that elsewhere in the United Nations national accounting figures are transformed to purchasing power parity before being compared internationally the paper suggests to follow suit and compile international value-added chains at real exchange rates, as well, and it sketches an introductory outline of how to do so.     

DOES CONSUMPTION ENTAIL INCOME? IMPLICATIONS OF THE DUAL CLASSIFICATION OF CONSUMPTION EXPENDITURE FOR THE INCOME SIDE OF THE HOUSEHOLD SECTOR IN THE NATIONAL ACCOUNTS*

In the future revision of the SNA the dual classification of flows in the national accounts will gain some importance with respect to consumption expenditures. It is likely that outlays of different institutions for consumption are added to form a new aggregate “individual consumption.” The question is whether this development requires an adjustment on the income side of the household accounts. In order to find an answer it is first necessary to scrutinize the concept of disposable income in its standard form, and in its different variations. The result is a distinction between “disposable income in the strict sense” and “income after distribution,” where the standard definition actually realizes the latter concept. It is then shown that the dual structure of the accounts does not permit the adding of individual consumption to saving of households so that the concept of enlarged income defeats its purpose.     

Inequality in Exchange: The Use of a World Trade Flow Table for Analyzing the International Economy

Whether or not the terms of trade between two countries may be unequal is a controversial question in the theory of international economics. In practice, the issue is resolved through statistical observation of the terms of trade. This measurement of the terms of trade follows a long tradition and produces impressive detail. It is, however, restricted in scope, because the first derivative, the change of the terms over time is observed only. Absolute levels depend on which year is chosen as the base year, a choice that is rather arbitrary and carries no theoretical meaning. Equality in the levels of terms of trade remains thus undefined. More precisely, it is always assumed to exist implicitly for whichever base year is being nominated. The paper proposes an answer to this ambiguity based on the relatively new statistical tool of international purchasing power compilation. The terms of trade are crucially dependent on the rate of foreign exchange (for which exports are traded against imports), which is predominantly governed by financial rather than commodity markets. Hence, the paper proposes to separate the two factors of influence and to call terms of trade ‘equal’ if the effective real exchange rate (as derived from the nominal exchange rate by means of purchasing power parities) equals one. On that basis a world trade flow table is constructed, putting the compiled equalities and inequalities in trade into a coherent, global perspective.     

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.     

Path dependence of the general price level: A value theoretic analysis

The paper examines path dependence of price indexes, a problem that has become acute after international adoption of chain indexes for price and volume changes in the SNA93. Path dependence is an old issue of index numbers, and has been in the way of using chain indexes ever since their invention. The paper accepts chaining at its start, and tries to develop a sound deflation procedure from there. In this analysis path dependence is less an issue of appropriate formalization of a given concept, the traditional approach in index number theory, but rather a problem of developing an interpretation to a given and now worldwide recommended statistical practice. The key issue is found in the fact that money is not only the standard means of payment, concerning central banks, but also the standard of value in an economy, a feature that bears directly on the compilation of price indexes and national accounts. As a result, a chained weighted index is shown to be path independent, if it is interpreted as a change not of prices, but of the unit of account in which prices are expressed.     

Who pays for whom? Elements of a macroeconomic approach to income inequality

National income is generated through national production in the form of ‘value added’; it is expended on goods and services in the form of ‘disposable’ or ‘net’ income. In this paper, I investigate what happens in between. The circuit of income flows generated in this way is comparable to the circuit of product flows, in its complexity. It can be analysed, so the tenet of the paper, in a similar way, by means of well-known tools of input–output (IO) analysis; this on the pre-condition, however, that you draw out the institutional framework of an economy in similar detail as is now customarily done for production units in IO analysis. Existing data do not suffice for the purpose, at present; this paper shows, by way of some exemplary calculations, what insight into the mechanism of national income distribution is gained if the necessary data, normally in the form of a large social accounting matrix, are provided.