About the data
Definitions
Data sources
Aggregate measures of output by industrial origin are obtained by summing the value of the gross output of producers and subtracting from that sum the value of intermediate goods consumed in production. No allowance is made in such gross measures for depreciation of fabricated assets or for depletion and degradation of natural resources. This concept is known as value added. The gross domestic product of a country represents the sum of value added by all producers in that country. Since 1968 the U.N. System of National Accounts (SNA) has called for estimates of GDP by industrial origin to be valued at either basic prices (excluding all indirect taxes on factors of production) or producer prices (including taxes on factors of production, but excluding indirect taxes on final output), but some countries report such data at purchasers’ prices—the prices at which final sales are made. This may affect estimates of the distribution of output. Total GDP shown here and elsewhere in the report is measured at purchasers’ prices. Components are measured at basic prices. When GDP components are valued at purchasers’ prices, this is noted in Primary data documentation.
While GDP by industrial origin is generally considered more reliable than estimates compiled from income or expenditure accounts, there are still many differences in the definitions, methods, and reporting standards that countries have adopted (see also box 4a). World Bank staff review the quality of national accounts data and sometimes make adjustments to improve consistency with international guidelines. Nevertheless, significant discrepancies remain between international standards and actual practice. Many statistical offices, especially those in developing countries, face severe limits in the resources, time, training, and budgets required to produce reliable and comprehensive series of national accounts.
Data problems in measuring output
Among the difficulties faced by compilers of national accounts is the extent of unreported or informal economic activity. In developing countries a large share of agricultural output is either not exchanged (because it is consumed within the household) or not exchanged for money. Financial transactions may also go unrecorded.
Often agricultural production must be estimated indirectly, using a combination of methods. This sometimes leads to crude approximations that can differ over time and across crops for reasons other than climatic conditions or farming techniques. Similarly, the inputs to agriculture, which cannot easily be allocated to specific outputs, are frequently "netted out" using equally crude and ad hoc approximations. For further discussion of the measurement of agricultural production, see the notes to table 4.3.
The output of industry ideally should be measured through regular censuses and surveys of firms. But in most developing countries such surveys tend to be infrequent and quickly go out of date, so many results must be extrapolated. Moreover, much of industrial production is organized not in firms but in unincorporated or owner-operated ventures that are not captured by surveys aimed at the formal sector. Even in large industries, where surveys are more likely to be conducted regularly, evasion of excise and other taxes lowers the estimates of value added. As countries move through the transition from state control of industry to private enterprise, such problems become more acute as new firms enter business and growing numbers of established firms fail to report. Following the SNA, output should include all such missing values as well as the value of illegal activities and other unrecorded, informal, or small-scale operations. Data covering these areas need to be collected using techniques other than conventional surveys.
For sectors dominated by large organizations and enterprises, such as public utilities, information on output, employment, and wages is usually readily available and reasonably reliable. But in the service sector the many self-employed workers and one-person businesses are sometimes difficult to locate and have little incentive to respond to surveys, let alone report their full earnings. Compounding these problems are the many forms of economic activity that go unrecorded, including the work that women and children do for little or no pay. For further discussion of the problems of using national accounts data, see Srinivasan (1994) and Heston (1994).
Dollar conversion
To produce national accounts aggregates that are internationally comparable, the value of output must be converted to a common currency. The World Bank conventionally uses the U.S. dollar and applies the average official exchange rate reported by the International Monetary Fund (IMF) for the year shown. When the official exchange rate is judged to diverge by an exceptionally large margin from the rate effectively applied to domestic transactions in foreign currencies and traded products, an alternative conversion factor is applied. Note that the three-year averaging technique (the World Bank Atlas method) applied to GNP per capita in table 1.1 is not used here.
• 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.
• Value added is the net output of a sector after adding up all outputs and subtracting intermediate inputs. It is calculated without making deductions for depreciation of fabricated assets or for depletion and degradation of natural resources. The Industrial origin of value added is determined by the International Standard Industrial Classification (ISIC), rev. 2. Agriculture corresponds to ISIC divisions 1–5 and includes forestry and fishing. Industry corresponds to ISIC divisions 10–45 and includes manufacturing (ISIC divisions 15–37). Services correspond to ISIC divisions 50–99.
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 (see OECD, National Accounts, 1960–1994, volumes 1 and 2). The complete national accounts time series is available on the World Development Indicators CD-ROM.