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The Input-Output Table and Integrated Economic Accounts

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The Input-Output Table and Integrated Economic Accounts Chapter 10 THE INPUT-OUTPUT TABLE AND INTEGRATED ECONOMIC ACCOUNTS 1. The supply-and-use tables (SUTs) 2. The aggregate supply and final uses tables 3. Intermediate use table (IUT) 4. The input-output table 5. The use of the input-output table for economic analysis 6. From the sum of the values added to GDP 7. The integrated economic account (IEA) 8. The transition from GDP to national income THE INPUT-OUTPUT TABLE AND INTEGRATED 10 ECONOMIC ACCOUNTS CHAPTER 10 The Input-output Table and Integrated Economic Accounts According to Edmond Malinvaud, one of the most distinguished contemporary French economists, the national accounts are “the presentation, in a rigorous accounting framework, of all the quantitative information relating to the nation’s economic activity”.* Here, the importance of the words “rigorous accounting framework” must be stressed. In fact, any macroeconomist carries in his head a simplified model of the economy in which everything made by someone is used by someone else, anything exported by someone is imported by someone else, anything saved by someone is invested by someone else, and so on. However, basic statistics are not presented in a “rigorous accounting framework”. They never precisely tie in together. For example, for a given product, the figures for total output are not going to correspond to the figures for total use. The reason for this is simply that output statistics are compiled differently from those of use: the statistical questionnaires are not addressed to the same people; the classifications are different; statisticians apply different methods; and so on. Some people have even ironically formulated a “theorem” that states if two statisticians are given the same set of data, the aggregate results they provide will necessarily be different! For these reasons, macroeconomists appreciate that national accounts constitute one of the rare cases in which statisticians provide tables that are (almost) completely consistent. X I. The totals are equal to the sum of the parts, the resources are equal to the uses, and so on. The simple model carried by macroeconomists in their heads is therefore given concrete shape, and it is this that gives national accounts their I. “Almost” because there potency. nevertheless remain certain inconsistencies known Even so, it has to be remembered that there are no miracles in as “statistical discrepancies” statistics. To obtain consistent tables, national accountants have been that will be discussed later obliged to cut here, to re-evaluate there – often arbitrarily – even though in this chapter. Some of these they use the best possible methods. The high level of consistency among we already saw in Chapter 8 tables in the national accounts (to within a few million of the national as the difference between the currency) should not be allowed to mask what is still only limited accuracy “B9” in the non-financial (see Chapter 11). Some statisticians take the view, however, that it is the accounts and the “B9” in the attempt to achieve consistency in the statistics that is one of the driving- financial accounts. forces for better quality. This consistency is obtained by using several global tables that we consider in this chapter. * Initiation à la comptabilité nationale, INSEE, 1973. We drew heavily on this text for Section 5 of this chapter. 266 UNDERSTANDING NATIONAL ACCOUNTS – ISBN 92-64-02566-9 – © OECD 2006 THE INPUT-OUTPUT TABLE AND INTEGRATED ECONOMIC ACCOUNTS 10 1. The supply-and-use tables (SUTs) 1. The supply-and-use tables (SUTs) In the national accounts, the first set of global tables is known as the “supply-and-use tables” (SUTs). A table of this kind applies to each product of the classification, for instance software. The equilibrium for this product can be stated as follows: Equation 1: Output + Imports = Supply = Uses = Intermediate consumption + Final consumption + GFCF + Changes in inventories + Exports First, let us interpret this equation in terms of numbers. The equation then signifies that the number of software programmes produced plus the number of software programmes imported is necessarily equal to the sum of the numbers of software programmes purchased by the user firms. The software is either for: 1) intermediate consumption (the small “disposable” programmes); 2) investment (the large professional programmes); 3) consumption by households (games software, in particular); 4) stocked as inventories by the software-producing firms in the form of work in progress; or 5) exported. This is an absolute equality: the resources (another name for “supply”) are necessarily equal to the uses, by definition. This explains why national accountants also refer to this equation as an accounting identity. They make constant use of it, mainly to derive one item based on results for the others. For example, suppose there were no statistics concerning changes in inventories of software programmes. No matter: if statistics are available for the other items, the “change in inventories” item can be obtained by making intelligent use of the accounting identity and deriving it as the balance of the other items: Change in inventories = Supply – Intermediate consumption – Final consumption – GFCF – Exports In this way, we kill two birds with one stone: we obtain an estimate of the changes in inventories, and at the same time we verify the accounting identity. This example was not chosen at random because in certain countries, like France, this is the way changes in inventories are obtained. Incidentally, this illustrates a paradox of the national accounts, namely that those compiling them are not necessarily anxious to have statistics on every single item in the supply-and-use tables. For one thing, it is certain that in this case the statistics will not spontaneously “tie up”. It will be necessary to choose which of the figures to trim, and this is no easy exercise. Therefore, it should not be thought that the accounting identity method is perfect. If changes in inventories are calculated as the balance between resources and other uses, all the errors of evaluation in any of these items will find their way into the change in inventories, with possibly pernicious results. It is therefore better in this case to have direct statistics in order to make corrections “by hand” of the supply-use balance. As can be seen, while in theory the equilibrium between resources and uses is indisputable, its verification in practice forms part of the “art” of the national accountant. Box 1 explains the statistical sources of the SUTs. UNDERSTANDING NATIONAL ACCOUNTS – ISBN 92-64-02566-9 – © OECD 2006 267 THE INPUT-OUTPUT TABLE AND INTEGRATED 10 ECONOMIC ACCOUNTS 1. The supply-and-use tables (SUTs) Box 1. Sources for the supply-and-use tables Chapters 1, 3 and 4 have already described the sources for each of the items in the supply and use tables in the case of France. We shall therefore give here only a brief reminder of what these are, still in the case of France. Market output is derived principally from sales statistics. Figures for merchandise imports and exports are taken from customs figures. Imports and exports of services mainly come from the Balance of Payments statistics of the Banque de France. Non-market output and consumption by general government come from the public accounts. The allocation of uses on the “domestic market” (defined as output + imports – exports) depends on the nature of the product. When the product is an investment, the use will be GFCF. When it is not an investment good, it is either household consumption or intermediate consumption. The nature of the product generally makes it possible to decide whether the sales constitute solely or mainly household consumption, or, by contrast, intermediate consumption. However, in cases where the nature of the product is not a sufficient criterion, bold assumptions have to be made to allocate the sales between final consumption and intermediate consumption. It is the intermediate consumption that is the most difficult to identify. This is because systematic surveys of firms – making it possible to know the nature of their purchases – are no longer done in France. Many of the cells in the intermediate consumption matrix are therefore estimated on the basis of information regarding the past. This is why INSEE, the French statistical office, is reluctant to publish intermediate use tables at detailed level. The changes in inventories are sometimes calculated as the difference between other items. The estimates are compiled, product by product, at the 472 level of the product classification, meaning that there are 472 SUTs. These are then aggregated and compared with the global estimates derived from statistical processing of the company accounts transmitted by firms to the tax authorities. The art of the national accountant then lies in matching the global estimates and the detailed estimates to obtain the high degree of consistency shown by tables in the national accounts. This operation is known as “arbitration” (see Chapter 11). Interpreting the accounting identity in terms of the number of software programmes was clearly simplistic. In practice, SUTs are drawn up in monetary terms, i.e. the amount of software programmes bought or sold in millions of national currency – in other words, the quantities multiplied by the prices. When these prices are those of the current period, one speaks of a supply-and-use table at current prices; when they are valued at the prices of a different period (often the previous year), one speaks of II. The accounting identity a supply-and-use table at constant prices. We saw in Chapter 2 the holds only in volume based importance of constant-price data in the national accounts, since they are on constant prices. It does fundamental to the calculation of GDP growth in volume. not hold using chain-linked volumes, which lead to In both cases, whether at current prices or constant prices, the non­additivity (see Chapter 2).
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