10 - ECONOMIC ACCOUNTS

Contents

1. Territorial economic accounts (ISTAT)

2. Estimates by Istituto Tagliacarne

1. Territorial economic accounts (ISTAT)

1.1 National accounts

The system of national accounts describes, in quantitative terms and in the form of accounts, the economical and financial activity of a country or specific geographical areas within it, for periods that coincide with the calendar year or for shorter periods of time.

The essential purpose of a macroeconomic system of accounts is to classify the complex economic activity, to summarise it into a limited number of fundamental aggregates and to display it within an organic overall framework that represents economic circuits.

As happens, therefore, for each economically organised unit, enterprise or household, also for the whole country it is possible to draw up periodic balance sheets which record in aggregated form the numerous actions carried out by the various economic agents operating in the activities of resource formation, distribution and use.

The set of accounts referred to the country is based on a series of relations of the “identity” type. The name account has its origin precisely in the fact that each aspect of economic life can be recorded in the sections of an account which measures revenues and expenditures according to schemes that relate to the accounting methods of enterprises.

In particular, the method for recording economic and financial flows adopted by national accounts is the one based on quadruple entry rules as two institutional units (for example households and public administrations) are usually involved in each economic transaction. It is a series of accounts which show how income is produced, distributed and used, how savings accumulate, how activities are financed and what positions the country occupies in relation to the rest of the world, as well as the circuits, the interdependencies and behavioural relationships among the various institutional sectors operating within the country itself.

The estimates are produced in accordance with the accounting schemes and entry rules set out in ESA95, the European system of accounts.

The series of accounts estimated according to the ESA95 system, which starts from 1995, is not comparable with the previous series. The adoption of the ESA95 and of the new classification of economic activities (NACE Rev.1 ) are the main factors that generate differences between the data calculated according to ESA95 and the previous ones, calculated according to ESA79.

The elaborations undertaken to estimate national accounts require a continuous process of updating statistical sources and estimation methods underlying them. National accounts data therefore undergo annual and extraordinary revisions. The latter are carried out every 5 years (in years ending in 0 or 5, depending on agreements established within the European Union) and initially involve estimation of the various aggregates for the benchmark year, during which a greater number of information sources are available and in relation to which all estimation methods are reconsidered. The changes deriving from them are then implemented across the whole time series of national accounts. The benchmark year for the current series of accounts is 2000.

The annual revisions generally regard the three years immediately preceding the latest year of estimation and are carried out mainly to adjust estimations to the most up-to-date information base.

Data on the resources and uses accounts show the sequence of accounts that concern current operations. The data refer to the formation, distribution and redistribution of income, in addition to its utilisation in the form of final uses. They make it possible to calculate savings, which constitute the essential factor of accumulation.

The aggregates at current prices are expressed at producer’s prices, at basic prices and at factor cost. It is pointed out that the producer’s price is the one that the latter can receive from the purchaser for a unit of a good or service produced including, therefore, any taxes to be paid on those units as a consequence of their production or sale (taxes on products); any subsidies to be received for that unit as a consequence of its production or sale (subsidies on products) are excluded from the price.

The basic price is the price that the producer can receive from the purchaser, deducting any taxes to pay on that unit but including any subsidies to be received.

It is underlined that Istat attributes greater importance to the valuation of value added expressed at basic prices, as this measures the actual amount received by the producer.

The valuation of the units of a good or service produced at factor cost includes subsidies on products and production, and excludes taxes on products and taxes on production.

The aggregates valuated at constant prices are expressed at previous year’s prices and at chain linked prices with 2000 as reference year. In accordance with the standards set out by European Union regulations, starting from the last extraordinary revision of the national accounts dated December 2005, Italian national accounts introduced the chain index method for measuring the real dynamics of economic aggregates.

Chain indices use volume measures which for each estimation reference year are obtained on the basis of previous year’s prices (for example, the 2007 estimations are based on 2006 prices, the 2006 estimations on 2005 prices, and so on). The chain linking technique is applied to estimations at previous year prices, making it possible to obtain indices for the reference year 2000 (2000=100); by multiplying the above mentioned indices by the 2000 current values, the chain linked series expressed in monetary terms are obtained. To summarise, chain linking consists in updating the annual weighting system and this enables the dynamics of national accounting aggregates to be measured so as to ensure greater relevance to the real dynamics of economic phenomena. In the past, a fixed weighting system based on the prices of a base year was used.

The employment data regard domestic and full time equivalent employment. Each measure provides different information on the contribution of the labour factor to the production process: domestic employment represents the number of physical persons employed, while full time equivalence measures the theoretical number of fulltime workers which is estimated from the all working activities of each person employed. Full time equivalence in any case constitutes the reference measure of the economic aggregates (GDP, value added, incomes and so on).

Final household consumption is published under two classifications of a functional type which group expenditure on goods and services into homogeneous categories according to the type of need that households wish to satisfy: the 3-digits Coicop classification and the one, derived from the Coicop classification, which is divided into 58 consumption functions (the Istat classification).

Final consumption expenditure is recorded at purchaser’s prices, that is, the price that the purchaser actually pays for products at the time of purchase, including any taxes on the product itself.

Gross fixed capital formation is published in 6 types of activity based on a new classification (An6) established under Regulation (EC) no. 1392/2007 of 13 November 2007. The new classification redefines the content of the six types of investment and at the same time provides a greater level of detail for products of new information and communication technologies.

Aggregates in currency are expressed in euro in all tables. For data prior to 1 January 2000, when the euro had not yet been introduced, the term “eurolire” is adopted since the changeover from the lira to the euro was based on the conversion rate set on 1 January 1999 (1936.27 lire = 1 euro). This calculation has made it possible to convert monetary values previously expressed in lire into euro.

1.2 Regional accounts

With the adoption of ESA95, the production of regional data became compulsory, in compliance with the EU legislation.

Istat releases complete estimates of regional accounts for year t, after a time lag of about 21 months; at the same time it issues revised estimates for the previous two years (t-1 and t-2), which are adjusted to an updated information base and realigned to the most recent version of national accounts. 

The most updated data refer to the complete estimates for 2007, revised data for 2005-2006 as adjusted on the basis of national estimates published in March 2009, and provisional 2008 estimates for several aggregates: GDP, household spending in terms of final consumption, added value, jobholders, work units and compensation of employees. In addition, the regional series for 1995-2000 has been reconstructed on the basis of the latest benchmark to bring it into correspondence with the time series for national accounts.

Regional estimates for 2008 were defined on a provisional basis because the information base, which is composed mostly of indirect indicators, is less robust than the full accounting issued 21 months later. The result is that data are distributed at a very limited disaggregation level: employment aggregates, added value and compensation of employees are only analyzed for three macro-branches (agriculture, industry and services), while household spending for final consumption is disaggregated into three types of products (durable goods, non-durable goods and services).

The Autonomous Provinces of Bolzano-Bozen and Trento are treated as distinct units for purposes of the production and publication of regional aggregates. Pursuant to Regulation no. 1059/2003 of the European Parliament, they are classified as 2nd level (like the 19 other Italian regions) in the European Nomenclature of territorial units for statistics (NUTS).

In addition to the supply and use account and the distribution of income account, the data set for 2000-2007 includes analyses for 24 branches (derived from the NACE Rev.1.1 classification) in terms of added value, compensation for employees, gross retributions, actual and imputed social contributions, gross fixed capital formation, jobholders (employed and self-employed) and corresponding work units. Household consumption is disaggregated into 12 groups of goods and services, and general government consumption into 10 spending functions. 

The data set for 2000-2007 includes: the supply and use account and the distribution of income account, analyses of 6 branches (derived from the NACE Rev.1.1 classification) on added value, compensation of employees, gross wages and salaries, actual and imputed social contributions, gross fixed capital formation, jobholders (employed and self-employed) and corresponding work units. Household consumption is available for three types of consumer goods (durable, non-durable and services), and general government consumption is available for 10 spending functions. 
 

The methodology used for the regional estimates varies according to the variable observed and to the level of territorial disaggregation.

Labour units are estimated according to a “direct approach” by combining information on employment (derived from the Labour Force Survey on households) with information derived from the Social Security registers.

An econometric approach is used to estimate the other aggregates. Estimation of GDP uses the same estimate of labour units; estimation of household expenditure uses also direct indicators derived from Istat’s survey on household balance.

The econometric model used is a development of the one created in cooperation with the Department of Statistical Science of the University of Udine and presented at the IV National Conference of Statistics.

It is underlined that the sum of regional data differs from the national total due to some economic activities that cannot be ascribed to the regions (e.g. Italian embassies abroad, sea platforms for the ex extraction of hydrocarbons).

The main sources used to calculate the aggregates released are listed here below.

General sources used for the regional accounts:

Persons employed and labour units:                     Labour Force Survey

         Statistical Archive of Active Enterprises (ASIA)

       Social security registers (INPS – DM10)

Compensation of employees:                                Survey on the accounts of enterprises

       Social security registers (INPS – DM10)

Value added and investments:                              Survey on the accounts of enterprises

      Survey on small and medium enterprises)

      Balance sheets of enterprises

Household expenditure for final consumption:  Survey on household consumption

It should be borne in mind that the social security registers provide information only on employees (self-employment is excluded),

Amongst the sources, the Statistical Archive of Active Enterprises (ASIA) is also used to integrate the information contained in the social security register (INPS – DM10) and in the balance sheet of enterprises. Besides information on employment, ASIA provides information for the correct input of enterprises’ economic activity en for the estimation of the number of persons working in enterprises as self- employed

2. Estimates by Istituto Tagliacarne

On the basis of the new time series of the regional accounts produced by Istat, Istituto Tagliacarne (Economic research Institute of Unioncamere) produces a further disaggregation at territorial level (both regional and provincial) of the value added and of the GDP at factors cost.

In general, the production of data at the province level is based on the following calculation modalities:

The GDP at factors cost, which represents the total goods and services produced in each province, is calculated by adding up the data on value added of each sector (and subtracting the doubled value represented by financial services imputable to the system)

The estimated value added refers to the productive units that carry out their activity within the same area, including no –marketable services (mainly supplied by the Public Administration).

The value added of each sector derives from the difference between the value of final goods and services produced by the various units and the corresponding value of intermediate goods and services that are produced by other units.

Agriculture, forestry, fisheries

The first step for the calculation of the value added of the primary sector is the calculation of the value of the saleable production of the various products (agriculture, animal-farming, forestry). The value of intermediate consumption (fertilisers, seeds, pesticides, feedstuffs, electricity, etc.) used in the production is then subtracted

Industry

Due to the different nature of statistics and information available, the calculation of the value added is made separately for industry and construction. For both sectors the estimation of value added is made without a separate valuation of the production and of the intermediate goods.

The method of direct valuation is used only for the regional data and, only for the years where the Censuses were carried out, also for the provincial data

For the regular updating of the provincial data, specific quantity indices are calculated for the two main variables that affect the value added: the use of the labour factor (expressed in terms of number of persons employed) and the used of capital (represented by the consumption of electricity).

Services

The calculation of the value added of the service sector is made mainly by disaggregating the regional data (or, in some cases, the national ones) through specific parameters that are considered to represent the level and the dynamics of the various sub-sectors of the service sector.