About the data
Definitions
Data sources
The growth of an economy is measured by the increase in value added produced by the individuals and enterprises operating in that economy. So, to measure real growth requires estimates of GDP and its components valued in constant prices from one period to the next. In principle, real value added can be estimated by measuring the quantity of goods produced in a period, valuing them at an agreed set of base year prices, and subtracting the cost of inputs, also in constant prices. This double deflation method, recommended by the U.N. System of National Accounts, depends on detailed information about prices of inputs and the quality of outputs. But in some sectors value added is extrapolated from the base year using volume indexes of output or inputs. In other sectors, particularly services, real output is imputed from labor inputs, such as the number of employees or real wages. The real output of governments and other unpriced services are calculated in the same way. Without well-defined measures of output, measuring the real growth of the service sector remains a vexing problem.
Technical progress can lead to improvements in both the production process and the quality of goods. Either effect, if not properly accounted for, can distort measures of value added and thus of growth. When inputs are used to estimate output, as in the service sector, unmeasured technical progress leads to underestimates of the quantity and value of output. Unmeasured changes in the quality of goods produced also lead to underestimates of value. The result can be underestimates of real growth and productivity and overestimates of inflation.
Nonmarket services pose a particular problem, especially in developing countries, where much economic activity may go unrecorded. Obtaining a complete picture of the economy requires estimating household production, barter exchanges, and illicit or deliberately unreported activity. How consistent and complete such estimates will be depends on the skill of the analysts and the resources available to them.
Rebasing national accounts
Countries occasionally "rebase" their national accounts by collecting a complete set of observations on the value and volume of production in a new base year. Using these data, they then update price indexes to reflect the relative importance of inputs and outputs in total output, and volume indexes to reflect relative price levels. The new base year should represent normal operation of the economy—a year not characterized by major shocks or distortions. But the choice of base year and the timing of economic surveys are also determined by administrative convenience and resource availability. Some developing countries have not rebased their national accounts for many years. Using an old base year can be misleading because implicit price and volume weights become progressively less useful and relevant.
The World Bank collects constant price national accounts series in national currencies and the country’s original base year. To obtain comparable series of constant price data, the main sectoral components of GDP by industrial origin (agriculture, industry, and services) are rescaled to a common base year, currently 1987, and summed to provide a new estimate of constant price GDP. This process gives rise to a difference between the derived aggregate (based on the sum of its components) and directly rescaled GDP. It may also result in differences between the growth rates calculated from the original base year GDP series and those calculated from the rescaled aggregate. Such deviations are unavoidable when aggregating index numbers. To reconcile constant price GDP measured from the expenditure side with the rescaled GDP by industrial origin, a statistical discrepancy is calculated and added to the private consumption component of GDP expenditures.
Measuring growth rates
Country growth rates are calculated using constant price data in the local currency. Regional and income group growth rates are calculated after converting local currencies to U.S. dollars using the World Bank’s International Economics Department (IEC) conversion factor. Growth rates are estimated by fitting a linear trend line to the logarithmic annual values of the given variable using the least-squares growth rate method. This produces an average growth rate that corresponds to a model of periodic compound growth. The least-squares growth rate method and the IEC conversion factor are described in Statistical methods.
Definitions
Most countries use the definitions of the U.N. System of National Accounts (SNA), series F, no. 2, version 3, referred to as the 1968 SNA. Version 4 of the SNA was completed in 1993. Until new economic surveys can be implemented, most countries will continue to use the 1968 SNA. A few low-income countries still use concepts from older SNA guidelines, including valuations such as factor cost and market prices in describing major economic aggregates.
• Gross domestic product at purchasers’ prices is the sum of the gross value added by all resident and nonresident producers in the economy plus any taxes and minus any subsidies not included in the value of the products. It is calculated without making deductions for depreciation of fabricated assets or for depletion and degradation of natural resources.
• Agriculture comprises value added from forestry, hunting, and fishing as well as cultivation of crops and livestock production.
• Industry comprises value added in mining, manufacturing (also reported as a separate subgroup), construction, electricity, water, and gas.
• Manufacturing refers to industries belonging to divisions 15–37 in the International Standard Industrial Classification, rev. 2.
• Services include value added in all other branches of economic activity, such as wholesale and retail trade (including hotels and restaurants), transport, and government, financial, professional, and personal services such as education, health care, and real estate services. Also included are imputed bank service charges, import duties, and any statistical discrepancies noted by national compilers as well as discrepancies arising from rescaling.
National accounts data for developing countries are collected from national statistical organizations and central banks by visiting and resident World Bank missions. Data for industrial countries come from OECD data files. The World Bank rescales constant price data to a common base year. The complete national accounts time series is available on the World Development Indicators CD-ROM. For information on the OECD national accounts series see OECD, National Accounts, 1960–1994, volumes 1 and 2.