National accounts

National accounts is included in the JEL classification codes: JEL: E01

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National accounts or national account systems (NAS) are the implementation of complete and consistent accounting techniques for measuring the economic activity of a nation (more broadly termed, social accounts). These include detailed underlying measures that rely on double-entry accounting. By construction such accounting makes the totals on both sides of an account equal even though they each measure different characteristics. As a method, the subject may be termed national accounting or social accounting.^[1] While sharing many common principles with business accounting, national accounts are based on economic concepts.^[2]

National accounts broadly present the production, income and expenditure activities of the economic actors (corporations, government, households) in an economy, including their relations with other countries' economies, and their wealth. They present both flows during a period and stocks at the end of a period, ensuring that the flows are fully reconciled with the stocks. National accounts also include measures of the stocks and flows of financial assets and liabilities (commonly called "financial accounts" or "flow of funds" accounts).

There are a number of aggregate measures in the national accounts, most notably gross domestic product or GDP - which is the most widely used measure of aggregate economic activity in a period - disposable income, saving and investment. These provide examples of macro-economic data. Such aggregate measures and their development over time are generally of strongest interest to economic policymakers, although the detailed national accounts contain a rich source of information for economic analysis, for example in the input-output tables which show how industries interact with each other in the production process.

For example, in the United States the national income and product accounts (NIPA) provide estimates for the money value of income and output respectively per year or quarter, including GDP. NIPA entries are called flows, to indicate that they are measured over time. Another application is the national balance sheet as to assets on one side, including the capital stock, and liabilities and wealth on the other, measured as of the end of the accounting period. Entries here are called stocks, to indicate their accumulation to a point in time, as distinct from a flow, which is measured over time.

National accounts can be presented in nominal from real amounts, that is, correcting money totals for price changes over time.^[3] Economic growth rates (most commonly the growth rate of GDP) are generally measured in real (constant price) terms.

The accounts are derived from a wide variety of statistical source data including surveys, administrative and census data, and regulatory data, which are integrated and harmonized in the conceptual framework. They are usually compiled by national statistical offices and/or central banks in each country, though this is not always the case, and may be released on both an annual and (less detailed) quarterly frequency.

Two developments relevant to the national accounts since the 1980s include the following. Generational accounting is a method for measuring redistribution of lifetime tax burdens across generations from social insurance, including social security and social health insurance. It has been proposed as a better guide to the sustainability of a fiscal policy than budget deficits, which reflect only taxes minus spending in the current year.^[4] Environmental or green national accounting is the method of valuing environmental assets, which are usually not counted in measuring national wealth, in part due to the difficulty of valuing them. The method has been proposed as an alternative to an implied zero valuation of environmental assets and as a way of measuring the sustainability of welfare levels in the presence environmental degradation.^[5]

Contents 1 Main components 2 History 3 See also 4 Notes 5 References

Main components

The presentation of national accounts data may vary by country (commonly, aggregate measures are given greatest prominence), however the main national accounts include the following accounts for the economy as a whole and its main economic actors.

• Current accounts:

production accounts which record the value of domestic output and the goods and services used up in producing that output. The balancing item of the accounts is value added, which is equal to GDP when expressed for the whole economy at market prices and in gross terms;

income accounts, which show primary and secondary income flows - both the income generated in production (e.g. wages and salaries) and distributive income flows (predominantly the redistributive effects of government taxes and social benefit payments). The balancing item of the accounts is disposable income ("National Income" when measured for the whole economy);

expenditure accounts, which show how disposable income is either consumed or saved. The balancing item of these accounts is saving.

• Capital accounts, which record the net accumulation, as the result of transactions, of non-financial assets; and the financing, by way of saving and capital transfers, of the accumulation. Net lending/borrowing is the balancing item for these accounts
• Financial accounts, which show the net acquisition of financial assets and the net incurrence of liabilities. The balance on these accounts is the net change in financial position.
• Balance sheets, which record the stock of assets, both financial and non-financial, and liabilities at a particular point in time. Net worth is the balance from the balance sheets (United Nations, 1993).

The accounts may be measured as gross or net of consumption of fixed capital (a concept in national accounts similar to depreciation in business accounts).

History

The original motivation for the development of national accounts and the systematic measurement of employment, was the need for accurate measures of aggregate economic activity. This was made more pressing by the Great Depression and as a basis for Keynesian macroeconomic stabilisation policy and wartime economic planning. The first efforts to develop such measures were undertaken in the late 1920s and 1930s, notably by Colin Clark and Simon Kuznets. Richard Stone of the U.K. led later contributions during World War II and thereafter. The first formal national accounts were published by the United States in 1947. Many European countries followed shortly thereafter, and the United Nations published A System of National Accounts and Supporting Tables in 1952.^[1]

International standards for national accounting are defined by the United Nations System of National Accounts, with the most recent version released in 2008. In Europe the worldwide System of National Accounts has been adapted in the European System of Accounts (ESA), which is applied by members of the European Union and many other European countries.

See also

Notes

References

• From The New Palgrave Dictionary of Economics, 2008, 2nd Edition:

"national income" by Thomas K. Rymes Abstract.

"national accounting, history of" by André Vanoli. Abstract.

"generational accounting" by Jagadeesh Gokhale. Abstract and uncorrected proof.

"green national accounting" by Sjak Smulders. Abstract.

"intangible capital" by Daniel E. Sichel. Abstract.

"economic growth" by Peter Howitt and David N. Weil Abstract.

"growth accounting" by Francesco Caselli. Abstract.

"level accounting" by Francesco Caselli. Abstract.

• From The New Palgrave: A Dictionary of Economics, 1987:

"social accounting," v. 4, pp. 377–82, by Nancy D. Ruggles.

"real income" v. 4, p. 104, by D. Usher.

• T. P. Hill, 2001. "Macroeconomic Data," International Encyclopedia of the Social & Behavioral Sciences, pp. 9111–9117. Abstract.
• Laurence J. Kotlikoff, 1992. Generational Accounting: Knowing Who Pays, and When, for What We Spend. Free Press.
• J. Steven Landefeld, Eugene P. Seskin, and Barbara M. Fraumeni. 2008. "Taking the Pulse of the Economy: Measuring GDP." Journal of Economic Perspectives, 22(2), pp. 193–216. PDF link (press +).
• National Bureau of Economic Research Book Series, 1937-2010. Studies in Income and Wealth, 71 v.
• Amartya Sen, 1979. "The Welfare Basis of Real Income Comparisons: A Survey," Journal of Economic Literature, 17(1), pp. 1–45.
• United Nations, 1993. About the System of National Accounts 1993.