Regulation (EU) No 549/2013 of the European Parliament and of the Council of 21 May 2013 on the European system of national and regional accounts in the European Union Text with EEA relevance

• Where there is no perpetual inventory of the stock of fixed capital goods, the change in the consumption of fixed capital in volume terms can be obtained by deflating the current price data by price indices derived from data on gross fixed capital formation by product. Account has then to be taken of the age structure of the capital goods acquired.

Compensation of employees

• 10.44For the purpose of measuring the volume of input from employee labour, the quantity unit for compensation of employees may be considered to be an hour's work of a given type and level of skill. As with goods and services, different qualities of work must be recognised and quantity relatives calculated for each separate type of work. The price associated with each type of work is the compensation paid per hour, which may vary, of course, between different types of work. A volume measure of work done may be calculated as a weighted average of the quantity relatives for different kinds of work, weighted by the values of compensation of employees in the previous year or fixed base year. Alternatively, a wage rate index may be calculated for work by calculating a weighted average of the proportionate changes in hourly rates of compensation for different types of work, again using compensation of employees as weights. If a Laspeyres type of volume index is calculated indirectly by deflating the changes in compensation of employees at current values by an index of the average change in hourly compensation, the latter should be a Paasche-type index.

Stocks of produced fixed assets and inventories

• 10.45Volumes at the prices of the previous year are needed both for stocks of produced fixed assets and for inventories. For the former, such data as are necessary for the calculation of capital output ratios are available if use is made of the perpetual inventory method. In other cases information on the values of stocks of assets may be collected from producers and deflation made by the price indices used for fixed capital formation, taking into account the age structure of stocks.

• Changes in inventories are measured by the value of entries to inventories less the value of withdrawals from inventories, and the value of any recurrent losses of goods held in inventories during a given period. Volumes at the prices of the previous year can be derived by the deflation of these components. In practice, however, it is rare for entries and withdrawals of stocks to be actually known, and often the only available information is the value of the stocks at the start and at the end of the period. In such cases, it will often be necessary to assume regular entries and withdrawals during the current period, so that the average price for the period can be considered relevant for both entries and withdrawals. In such circumstances, calculating the variation in stocks by the difference between the values of the entries and withdrawals amounts to the same as calculating the difference between the values of the initial and final stocks. The variation in stocks in volume terms can then be calculated by deflating the initial and final stocks to bring them in line with the average price of the base period. When the variations in stocks are known in quantity terms, it is possible, again assuming regular entries and withdrawals, to calculate the volume of the variation in stocks by applying the average price of the base period to the variation in stocks in quantity terms.

MEASURES OF REAL INCOME FOR THE TOTAL ECONOMY

• 10.46It is generally not possible to divide income flows into a price and a quantity component and for this reason price and volume measures cannot be defined in the same way as for the flows and stocks of products. Income flows can be measured in real terms only if one chooses some selected basket of goods and services on which the income is typically spent and uses the price index for this basket as a deflator of current incomes. The choice is always arbitrary in the sense that income is seldom spent specifically for purchases during the period in question. Some of it may be saved for purchases in later periods or, alternatively, the purchases during the period may be partly financed from savings made earlier.

• 10.47Gross domestic product at previous year prices measures the total production (less the intermediate consumption) in volume terms for the total economy. The total real income of residents is influenced not only by this volume of production but also by the rate at which exports can be traded against imports from the rest of the world. If the terms of trade improve, fewer exports are needed to pay for a given volume of imports, so that at a given level of domestic production goods and services can be reallocated from exports to consumption or capital formation.

• Real gross domestic income can be derived by adding the so-called trading gain to volume figures on gross domestic product. The trading gain or, as the case may be, loss is defined as:

Image omitted; see official source

• i.e. the current balance of exports less imports, deflated by a price index P, less the difference between the deflated value of exports and the deflated value of imports. The choice of an appropriate deflator P for the current trade balances should be left to the statistical authorities in a country, taking account of the particular circumstances of that country. In circumstances in which there is uncertainty about the choice of deflator an average of the import and the export price indices is likely to provide a suitable deflator.

• Various real income aggregates are identified and defined in the way shown as follows:

• gross domestic product in volume terms

• plus the trading gain or loss from changes in terms of trade

• equals real gross domestic income

• plus real primary incomes receivable from abroad

• minus real primary incomes payable to abroad

• equals real gross national income

• plus real current transfers receivable from abroad

• minus real current transfers payable to abroad

• equals real gross national disposable income

• minus consumption of fixed capital in volume terms

• equals real net national disposable income.

• To be able to express the various national income aggregates in real terms, it is recommended that receivables and payables of primary incomes and transfers to and from abroad should be deflated with an index of gross domestic final expenditure. Real national disposable income is to be expressed on a net basis by deducting from its gross value the consumption of fixed capital in volume terms.

INTERSPATIAL PRICE AND VOLUME INDICES

• 10.48The fact that countries have different price levels and currencies poses a challenge to interspatial comparisons of prices and volumes. Nominal exchange rates are not suitable conversion factors in such comparisons, because they do not adequately reflect price level differences, and because they are not sufficiently stable over time.

• 10.49Instead, purchasing power parities (PPPs) are applied. A PPP is defined as the number of units of country B's currency that is needed in country B in order to purchase the same quantity of goods and services that one unit of country A's currency will purchase in country A. PPPs can thus be interpreted as the exchange rate of an artificial currency commonly referred to as the purchasing power standard (PPS). If the expenditures of countries A and B expressed in national currencies are converted into PPS, the resulting figures are expressed in the same price level and the same currency, allowing a meaningful comparison of volumes.

• 10.50PPPs for market goods and services are based on international price surveys. Such price surveys are carried out simultaneously in all participating countries, based on a common product sample. The sample items are clearly specified in terms of their technical characteristics, as well as other variables that are assumed to influence the price, like installation costs and the terms of sale. While priority is given to the comparability of the sample items, this must nevertheless be weighted against their representativity in national markets. The product sample should ideally be equally representative in all participating countries.

• 10.51For non-market services, interspatial comparisons face the same problem as intertemporal ones, since no market prices exist in either dimension. Traditionally, an input approach (or an input cost approach) has been applied, under the assumption that output equals the sum of inputs. This approach, which implies direct or indirect volume comparisons of inputs, fails to take differences in productivity into account. For this reason, as for intertemporal comparisons, methods are preferred which focus either on the direct measurement of output or on output prices which are subsequently used to deflate expenditure, at least for individual services such as education and health.

• 10.52In the calculation of PPPs, the same index number formulae are applied as in the calculation of temporal indices. In a bilateral context involving two countries, A and B, either country can be used to give the weights. Viewed from the angle of country A, a Laspeyres-type index with weights from country A can be calculated as well as a Paasche-type index using weights from country B. However, if the two economies are structurally different, the spread between these two indices may be quite large, and the end result would be heavily influenced by the choice of index. In binary comparisons, it is thus preferable to apply the average of the two, that is, a Fisher index.

• 10.53Explicit numerical weights are usually not available at the level of individual sample items. Therefore, a form of implicit weighting is applied, based on whether countries regard a particular item as representative of the domestic consumption pattern or not. The lowest level of aggregation for which numerical weights are available, is referred to as the basic heading (BH) level.

• 10.54Transitivity implies that the direct PPP between countries A and C is equal to the indirect PPP derived by multiplying the direct PPP between countries A and B (or any other third country) and the direct PPP between countries B and C. The Fisher PPPs at BH level are not transitive, but it is possible to derive from them a set of transitive PPPs that resemble the original Fisher indices, using the criterion of least squares for this purpose. Applying the so-called Éltetö-Köves-Szulc (EKS) formula minimises the deviations between the original Fisher indices and produces a complete set of transitive PPPs at BH level.

• 10.55The resulting set of transitive PPPs for all countries and all BHs are aggregated up to the level of total GDP using expenditures from national accounts as weights. The aggregate PPPs at the level of GDP or any other category can be applied in, for instance, the calculation of real expenditures and spatial volume indices. A PPP divided by the nominal exchange rate between two countries produces a price level index (PLI), that can be used in analyses of countries' comparative price levels.

• 10.56The European Commission (Eurostat) is responsible for calculating PPPs for the Member States in accordance with Regulation (EC) No 1445/2007 ([^E0014]). In practice, these PPP calculations are embedded in a wider PPP program coordinated jointly by Eurostat and OECD. The detailed methods used in the program are described in the Eurostat-OECD Methodological manual on purchasing power parities ([^E0015])

CHAPTER 11

POPULATION AND LABOUR INPUTS

• 11.01Comparisons between countries, or between industries or sectors within the same economy, are more useful for some purposes when aggregates in the national accounts (for example, gross domestic product, the final consumption of households, the value added of an industry, compensation of employees) are considered in relation to the number of inhabitants and labour input variables. For such cases, definitions of population and labour inputs must be consistent with the concepts used in national accounts, and reflect the production boundary of national accounts.

• 11.02The aim of this Chapter is to describe the frameworks and measures of population and employment statistics, and to provide guidance to the extent those frameworks correspond to the system of national accounts.

• 11.03Labour inputs are classified on the basis of the same statistical units as used for the analysis of production, namely the local kind-of-activity unit and the institutional unit.

• 11.04The aggregates to which the figures for population and labour inputs are related are often annual totals. In such cases, average population and labour inputs during the year have to be used. When surveys are conducted several times during the course of the year, the figure taken is the average of the results obtained on those various dates. When a survey is carried out over a period within the year, the period used must be representative; the latest available information on variations throughout the year must be used in estimating data for the year as a whole. For example, when estimating average employment, allowance must be made for the fact that certain people do not work throughout the whole year, for example casual workers and seasonal workers.

TOTAL POPULATION

• 11.05 Definition: on a given date, the total population of a country consists of all persons, national or foreign, who are permanently settled in the economic territory of the country, even if they are temporarily absent from it. An annual average of head counts will provide an appropriate basis for estimating national accounts variables or for use as a denominator in comparisons.

• 11.06Total population is defined for national accounts according to the concept of residence as described in Chapter 2. A person who is staying, or intends to stay, on the economic territory of the country for a period of one year or more is regarded as permanently settled there. A person is regarded as being temporarily absent if he or she is permanently settled in the country but is staying, or intends to stay, in the rest of the world for a period of less than one year. All individuals who belong to the same household are resident where the household has a centre of predominant economic interest: this is where the household maintains a dwelling, or succession of dwellings, which members of the household treat, and use, as their principal residence. A member of a resident household continues to be a resident even if that individual makes frequent journeys outside the economic territory because their centre of economic interest remains in the economy in which the household is resident.

• 11.07The total population of a country includes:

• (a) nationals settled in the country;

• (b) national civilians who are staying abroad for a period of less than one year. Examples are frontier workers, seasonal workers, and tourists;

• (c) foreign civilians settled in the country for a period of one year or more, including the personnel and accompanying members of their households, of the institutions of the European Union and of international civilian organisations located within the geographic territory of the country;

• (d) foreign military personnel working with international military organisations located within the geographic territory of the country;

• (e) foreign technical assistance personnel on long-term assignments who work in the country for over a year, and are deemed to be employed by their host government on behalf of the government, or international organisation, which is financing their work.

• The total population also includes the following, irrespective of the length of their stay outside the country:

• (a) national students however long they study abroad;

• (b) members of the country's armed forces stationed in the rest of the world;

• (c) nationals who are on the staff of national scientific bases established outside the geographic territory of the country;

• (d) nationals who are on the staff of diplomatic missions abroad;

• (e) nationals who are members of the crews of fishing boats, other ships, aircraft and floating platforms operating outside the economic territory;

• (f) patients taking medical treatment abroad.

• 11.08Conversely, the total population of a country does not include:

• (a) foreign civilians staying on the territory for less than a year, such as frontier workers, seasonal workers, tourists, and patients;

• (b) national civilians staying abroad for a period of one year or more;

• (c) national military personnel working with international organisations located in the rest of the world;

• (d) national technical assistance personnel on long-term assignments who work abroad and are deemed to be employed by their host government on behalf of the government, or international organisation, which is financing their work;

• (e) foreign students however long they study in the country;

• (f) members of the armed forces of a foreign country who are stationed in the country;

• (g) the foreign personnel of foreign scientific bases located on the geographic territory of the country;

• (h) members of foreign diplomatic missions stationed in the country.

• 11.09The definition of population given above differs from the present, or de facto, population, which consists of persons actually present on the geographic territory of a country at a given date. It also differs from the registered population.

ECONOMICALLY ACTIVE POPULATION

• 11.10 Definition: the economically active population comprises all persons, who provide, or are available to provide, the supply of labour for productive activities falling in the production boundary of national accounts. It includes all persons who fulfil the requirements for inclusion in employment or in unemployment as subsequently defined.

• The relevant standards on labour force statistics are maintained by the International Labour Organisation (ILO). The ILO standards are contained in 'Resolutions', which are adopted by sessions of the International Conference of Labour Statisticians (ICLS). The one most relevant to collecting and compiling labour force data is the Resolution concerning statistics of the economically active population, employment, unemployment and underemployment ([^E0016]). This resolution was adopted by the 13th International Conference of Labour Statisticians in October 1982, and amended by resolution of the Eighteenth ICLS in December 2008. In that resolution the labour force is defined in terms of individuals engaged in an activity included within the national accounts production boundary.

EMPLOYMENT

• 11.11 Definition: employment covers all persons engaged in productive activity that falls within the production boundary of the national accounts.

• Persons in employment are employees or self-employed persons. Persons holding more than one job are classified as employees or self-employed according to their main job.

Employees

• 11.12 Definition: employees are defined as persons who, by agreement, work for a resident institutional unit and receive a remuneration recorded as compensation of employees.

• 'Employees' correspond to the ILO definition of 'paid employment'. The relationship of employer to employee exists when there is a contract, which may be formal or informal, between an enterprise and a person, entered into voluntarily by both parties, whereby the person works for the enterprise in return for remuneration in cash or in kind.

• Persons having both a job as an employee and a job as a self-employed person are classified as an employee if the employee job constitutes their principal activity by income. If income is not available, then hours worked is to be used as a proxy.

• 11.13The following categories of employees are included:

• (a) persons engaged by an employer under a contract of employment. Examples are manual and non-manual workers, management personnel, domestic staff, and people carrying out remunerated productive activity under employment programs;

• (b) civil servants and other government employees whose terms and conditions of employment are laid down by public law;

• (c) the armed forces, consisting of those who have voluntarily enlisted for both long and short engagements, and conscripts including conscripts working for civil purposes;

• (d) ministers of religion, if they are paid directly by general government or a non-profit institution;

• (e) owners of corporations and quasi-corporations if they work in those enterprises;

• (f) students who have a formal commitment whereby they contribute some of their own labour as an input to an enterprise's process of production in return for remuneration in cash or in kind as education services;

• (g) outworkers if there is an explicit agreement that the outworker is remunerated on the basis of the work done: that is, the amount of labour which is contributed as an input into some process of production; an outworker is an employee if their contract with the employer is essentially to provide labour;

• (h) persons employed by temporary employment agencies, who are to be included in the industry of the agency which employs them, and not in the industry of the enterprise for which they actually work.

• 11.14Persons temporarily not at work are also considered as employees provided they have a formal job attachment. This formal attachment shall be determined according to one or more of the following criteria:

• (a) the continued receipt of a wage or salary;

• (b) an assurance of a return to work following the end of the contingency, or an agreement as to the date of return.

• This covers persons temporarily not at work because of illness or injury, holiday or vacation, strike or lockout, educational or training leave, maternity or parental leave, reduction in economic activity, temporary disorganisation or suspension of work due to reasons such as: bad weather, mechanical or electrical breakdown, or shortage of raw materials or fuels. It also covers other temporary absences with or without leave.

Self-employed persons

• 11.15 Definition: self-employed persons are defined as persons who are the sole owners, or joint owners, of the unincorporated enterprises in which they work, excluding those unincorporated enterprises that are classified as quasi-corporations. Persons having both an employee job and a job as a self-employed person are classified here if the self-employed job constitutes their principle activity by income.

• If income is not readily available, then hours worked may be used as a proxy.

• Self-employed persons may be temporarily not at work during the reference period. The compensation for self-employment is mixed income.

• 11.16Self-employed persons include the following categories:

• (a) unpaid family workers, including those working in unincorporated enterprises engaged in market production;

• (b) outworkers whose income is a function of the value of the outputs from some process of production for which they are responsible. The contract of those outworkers is to provide goods or services to the commissioning party;

• (c) workers engaged in production undertaken entirely for their own final consumption or own capital formation, either individually or collectively. Such production must be a significant part of their final use for it to be recorded.

• Unpaid voluntary workers are included with self-employed persons if their volunteer activities result in goods; for example the construction of a dwelling, church or other building. But if their volunteer activities result in services, for example caretaking or cleaning without payment, they are not included under employment, because those volunteer services are excluded from production.

• Although the services householders provide to themselves as owners of their dwellings are included within the national accounts production boundary, there is no labour input in the production of such services; owner-occupiers of dwellings are not considered as self-employed persons.

Employment and residence

• 11.17The results of the activity of producer units are consistent in coverage with employment if the latter includes both the residents and the non-residents who work for resident producer units.

• Employment, therefore, also includes the following categories:

• (a) non-resident border workers, i.e. persons who cross the border each day to work in the economic territory;

• (b) non-resident seasonal workers, i.e. persons who move into the economic territory and stay there for less than one year in order to work in industries which periodically require additional labour;

• (c) members of the country's armed forces stationed in the rest of the world;

• (d) nationals who are on the staff of national scientific bases established outside the geographic territory of the country;

• (e) nationals who are on the staff of diplomatic missions abroad;

• (f) members of the crews of fishing boats, other ships, aircraft and floating platforms operated by resident units;

• (g) local employees of general government bodies situated outside the economic territory.

• 11.18The following categories are excluded from employment:

• (a) residents who are border workers or seasonal workers, i.e. who work in another economic territory;

• (b) nationals who are members of the crews of fishing boats, other ships, aircraft and floating platforms operated by non-resident units;

• (c) local employees of foreign government agencies located on the geographic territory of the country;

• (d) the personnel of the institutions of the European Union and international civilian organisations located within the geographic territory of the country (including local employees directly recruited);

• (e) members of armed forces working with international military organisations located on the geographic territory of the country;

• (f) nationals working in foreign scientific bases established in the economic territory.

• 11.19In order to be able to make the transition to the concepts generally used in labour force statistics (employment on a national basis), the ESA specially provides for the following items to be shown separately:

• (a) the conscripted forces (not included in the labour force statistics, but included in the ESA under general government services);

• (b) residents working for non-resident producer units (included in labour force statistics but not included in employment as defined in the ESA);

• (c) non-residents working with resident producer units (not included in labour force statistics but included in employment as defined in the ESA);

• (d) resident workers living permanently in an institution;

• (e) resident workers under the age taken into account in labour force statistics.

UNEMPLOYMENT

• 11.20 Definition: in accordance with the guidelines established by the International Labour Organization (13th International Conference of Labour Statisticians), further specified in the European Union context by Commission Regulation (EC) 1897/2000 ([^E0017]), the concept of unemployment comprises all persons above a specified age who during the reference period were:

• (a) 'without work', i.e. not in paid employment or self-employment;

• (b) 'currently available for work', i.e. were available for paid employment or self-employment during the reference period; and

• (c) 'seeking work', i.e. had taken specific steps in a specified recent period to seek paid employment or self-employment.

• 11.21The specific steps may include: registration at a public or private employment exchange; application to employers; checking at worksites, farms, factory gates, markets or other assembly places; placing or answering newspaper advertisements; seeking assistance of friends or relatives; looking for land, building, machinery or equipment to establish own enterprise; applying for permits and licences or financial resources, etc.

JOBS

• 11.22 Definition: a job is defined as an explicit or implicit contract between a person and a resident institutional unit to perform work in return for compensation for a defined period or until further notice.

• This definition covers the following terms:

• (a) the explicit or implicit contract relates to the provision of labour input, not to supplying output of a good or service;

• (b) work means any activity which contributes to the production of goods and services within the production boundary. The legality of the work and the age of the worker are irrelevant;

• (c) compensation is to be interpreted here in a wide sense, including mixed income of self-employed persons.

• In this definition of a job, both employee and self-employment jobs are covered; that is, an employee job if the person belongs to another institutional unit than the employer and a self-employment job if the person belongs to the same institutional unit as the employer.

• 11.23The concept of jobs differs from the concept of employment as defined above.

• (a) Jobs include second, third, etc. jobs of the same person. Those second, third, etc. jobs of a person may either successively follow one another within the reference period (usually, a week) or, as when someone has an evening job as well as a daytime job, run in parallel.

• (b) On the other hand, jobs exclude persons temporarily not at work but who have a 'formal attachment to their job' in the form, for instance, of 'an assurance of return to work or an agreement as to the date of return'. Such an understanding between an employer and a person on lay-off or away on training is not counted as a job in the system.

Jobs and residence

• 11.24A job in the economic territory of the country is an explicit or implicit contract between a person (who may be resident in another economic territory) and an institutional unit resident in the country.

• For measuring labour input to domestic economic activity, only the residence of the producer institutional unit is relevant, because resident producers alone contribute to gross domestic product.

• 11.25Moreover:

• (a) jobs are included in the count of jobs in the economic territory when the employees of a resident producer are working temporarily in another economic territory and when the nature and duration of the activity do not warrant its treatment as a notional resident unit of that other territory;

• (b) jobs are excluded from the count of jobs in the economic territory when performed for non-resident institutional units, that is, for units with a centre of interest in another country which have no intention of being active on the domestic territory for a year or more;

• (c) the jobs of the staff of international organisations and those of locally recruited staff engaged by foreign embassies are excluded from the count, since the employing units are not resident.

THE NON-OBSERVED ECONOMY

• 11.26Value of production activities that are not directly observed are, in principle, included within the national accounts production boundary. The following three types of activity are therefore included:

• (a) illegal activities where the parties are willing partners in an economic transaction;

• (b) hidden and underground activities where the transactions themselves are not against the law, but are unreported to avoid official scrutiny;

• (c) activities described as 'informal', typically where no records are kept.

• In principle, the remuneration of these workers is included in compensation of employees or mixed income. This adjustment is to be taken into account in the data on employment and self-employment when calculating ratios and other statistics.

• Illegal activities where either of the parties are not willing participants (e.g. theft) are not economic transactions and so are not included in the production boundary.

TOTAL HOURS WORKED

• 11.27 Definition: total hours worked represents the aggregate number of hours actually worked as an employee or self-employed person during the accounting period, when their output is within the production boundary.

• Given the broad definition of employees which covers persons temporarily not at work but with a formal attachment, and part-time workers, the appropriate measure for productivity calculation is not a head count but total hours worked.

• Total hours worked is the most appropriate measure of labour inputs for the national accounts.

Specifying hours actually worked

• 11.28Total hours actually worked represents those hours of labour that have contributed to production and can be defined with reference to the production boundary of national accounts. The ILO standard contained in the Resolution concerning the measurement of working time, adopted by the 18th ICLS in December 2008 ([^E0018]), defines hours actually worked as the time persons spend in the performance of activities that contribute to the production of goods and services during a specified reference period. The resolution defines hours worked as follows:

• (1) hours actually worked occur in all types of jobs under varying work and compensation arrangements paid or unpaid, that can be performed at all types of location;

• (2) hours actually worked are not linked to administrative or legal concepts and therefore apply to all working persons and may occur within normal or contractual hours or as overtime;

• (3) statistics for hours actually worked shall include:
• (a) hours actually worked during normal periods of work and directly contributing to production;
• (b) paid time spent on training;
• (c) time worked in addition to hours worked during normal periods of work, known as overtime. Note that overtime hours worked shall be included even if they are unpaid;
• (d) time spent working on tasks such as the preparation of the workplace, repairs and maintenance, preparation and cleaning of tools, and the preparation of receipts, time sheets and reports;
• (e) time spent waiting or standing-by during short-term disruptions during the workday for such reasons as lack of supply of work, breakdown of machinery, or accidents, or time spent at the place of work during which no work is done but for which payment is made under a guaranteed employment contract;
• (f) time corresponding to short periods of rest during the workday, including tea and coffee breaks;
• (g) on-call work arrangements. Where this occurs away from the work-place, for example at home, the time is included in hours actually worked according to the degree to which the person's non-work activities and movements are restricted;
• (h) hours worked by defence force personnel, including conscripts, shall be included even if they are outside the scope of a country's labour force survey;

• (4) statistics for hours actually worked shall exclude:
• (a) hours paid for but not worked, such as paid annual leave, paid public holidays, paid sick leave, parental leave, strikes, 'short leave' for medical visits etc., bad weather shutdowns;
• (b) meal breaks;
• (c) time spent on travel between home and work, although any work undertaken while commuting shall be included;
• (d) education other than training.

• More exhaustive definitions of these criteria can be found in the ICLS Resolution concerning the measurement of working time of December 2008 ([^E0019]).

• 11.29Total hours worked is the aggregate number of hours actually worked during the accounting period in employee and self-employment jobs within the economic territory:

• (a) including work outside the economic territory for resident employer institutional units who have no centre of economic interest there;

• (b) excluding work for foreign employer institutional units who have no centre of economic interest within the economic territory.

• 11.30Many surveys of enterprises record hours paid not hours worked. In those cases, hours worked have to be estimated for each job group, using whatever information is available about paid leave etc.

• 11.31For business cycle analysis, it may be useful to adjust total hours worked by adopting a standard number of working days per year.

FULL-TIME EQUIVALENCE

• 11.32 Definition: full-time equivalent employment, which equals the number of full-time equivalent jobs, is defined as total hours worked divided by the average annual number of hours worked in full-time jobs within the economic territory.

• 11.33This definition does not necessarily describe how the concept is estimated: since the length of a full-time job has changed through time and differs between industries, methods which establish the average proportion and average hours of less than full-time jobs in each job group are used. A normal full time week must first be estimated in each job group. A job group can be defined, inside an industry, according to gender and kind of work. Hours contractually agreed upon constitute, for employee jobs, the appropriate criteria for determining those figures. The full-time equivalent is calculated separately in each job group, then summed up.

• 11.34Total hours worked are the best measure of labour inputs, but where this information is lacking, full-time equivalence may be the best available proxy; it can be estimated more easily and enables international comparisons with countries which can only estimate full-time equivalent employment.

EMPLOYEE LABOUR INPUT AT CONSTANT COMPENSATION

• 11.35 Definition: for labour inputs of similar type and qualifications in the base period, employee labour input at constant compensation measures current labour inputs valued at the levels of compensation of employee jobs ruling during a selected base period.

• 11.36Compensation of employees at current prices divided by employee labour input at constant compensation yields an implicit compensation price index comparable with the implicit price index of final uses.

• 11.37The purpose of the concept of employee labour input at constant compensation is to describe the changes in the composition of the work force, for example from lower paid to higher paid workers. To be effective, the analysis is to be undertaken on an industry basis.

PRODUCTIVITY MEASURES

• 11.38 Definition: productivity is a measure of output from a production process, per unit of input. For example, labour productivity is typically measured as a ratio of output per labour-hour (an input). It is therefore essential that labour measures used in studies where the output is based on national accounts measures are consistent in concept and coverage with the national accounts.

CHAPTER 12

QUARTERLY NATIONAL ACCOUNTS

INTRODUCTION

• 12.01This Chapter sets out the major principles and characteristics of quarterly national accounts.

• 12.02Quarterly national accounts are national accounts whose reference period is a quarter. They are a system of integrated quarterly indicators. Quarterly national accounts provide a comprehensive accounting framework within which economic data can be compiled and presented in a format that is designed for purposes of economic analysis, decision-taking and policymaking, on a quarterly basis.

• 12.03Quarterly national accounts adopt the same principles, definitions, and structure as annual national accounts. Quarterly national accounts use the concepts of annual national accounts unless indicated otherwise in this Chapter.

• 12.04Quarterly national accounts cover the entire sequence of accounts and balance sheets. In practice, the constraints of data availability, time, and resources mean that quarterly national accounts are less complete than annual national accounts.

• In comparison to annual national accounts, quarterly national accounts are more limited in scope. They focus on measuring GDP, on measuring the supply and use of goods and services, and on the generation of income. There is limited detail on industry activity and specific transactions. This reflects a trade-off between timeliness and scope, detail and reliability.

• 12.05Compared to annual national accounts, quarterly national accounts are compiled and released more frequently. They provide an early overview of economic developments and can be used for early estimates of annual national accounts.

• 12.06The time series of quarterly national accounts statistics, due to their quarterly frequency, present a seasonal pattern and are affected by calendar events. The seasonal pattern is smoothed out through seasonal and calendar adjustment procedures.

• 12.07Quarterly national accounts rely on more limited data sources than annual national accounts and their compilation requires more use of statistical and econometric techniques. There are two approaches to the compilation of quarterly national accounts: the direct approach and the indirect approach.

• 12.08The direct approach is based on the availability, at quarterly intervals, of similar data sources as those used to compile annual accounts; under this approach, similar methods of compilation are applied. The indirect approach uses statistical and econometric estimation techniques that use information from the annual accounts and short-term indicators to interpolate and extrapolate from the annual estimates. The choice between those approaches depends on the information used in the production of annual accounts being readily available in the same form at quarterly level.

• 12.09The purpose of quarterly national accounts is different from that of annual national accounts. Quarterly national accounts focus on the short-term movements of the economy and provide a coherent measure of such movements within the national accounts framework. Emphasis is placed on growth rates and their characteristics over time such as acceleration, deceleration or change in sign. The annual national accounts' emphasis is on levels and the structure of the economy, as well as growth rates.

• Annual national accounts are less suitable than quarterly national accounts for business cycle analyses, because annual data mask short-term economic developments.

• 12.10Quarterly national accounts may be used in the compilation of annual national accounts. They improve the reliability and timeliness of annual national accounts and, in some countries, annual national accounts are directly derived from the aggregation over the year of quarterly national accounts. Those different roles reflect differences in data availability and in compilation processes.

• 12.11A range of data feeds into the compilation of quarterly national accounts, such as short term statistics on production, prices, employment and external trade, confidence indicators of business and consumers and administrative data like VAT revenues. In comparison to such indicators, quarterly national accounts offer:

• (a) a broader scope;

• (b) exhaustiveness;

• (c) a coherent national accounts framework;

• (d) consistency with the concepts and data in national accounts;

• (e) international comparability based on an international methodological framework, the 2008 SNA.

• 12.12The coverage of quarterly national accounts corresponds to the coverage of annual accounts, encompassing the entire sequence of accounts and the corresponding aggregates as well as the supply and use framework. However, the reduced availability of information and the quarterly frequency of compilation usually result in reduced coverage and scope for quarterly national accounts.

• The quarterly accounts framework includes the following:

• (a) main aggregates, including employment and population;

• (b) financial and non-financial accounts by institutional sector;

• (c) limited detail breakdowns of key aggregates such as gross value added, final consumption expenditure, gross fixed capital formation, imports and exports of goods and services, and employment; and

• (d) a simplified sequence of accounts.

• Such elements are usefully complemented, for compilation purposes, by a simplified supply and use framework.

SPECIFIC FEATURES OF QUARTERLY NATIONAL ACCOUNTS

• 12.13Compilation issues which are especially important for quarterly national accounts are:

• (a) time of recording;

• (b) flash estimates;

• (c) balancing and benchmarking;

• (d) chain-linked volume measures; and

• (e) seasonal and calendar adjustments.

Time of recording

• 12.14The rules on the time of recording that apply to quarterly national accounts are the same as those that apply for annual national accounts. However, specific measurement problems with respect to the time of recording arise due to the shorter period of recording. This affects, in particular, measuring of:

• (a) work-in-progress;

• (b) activities in specific periods within a year; and

• (c) low-frequency payments.

• 12.15For quarterly national accounts, recording of activities and flows concentrated in specific periods within a year is important. The size of such activities by quarter, such as the output of agriculture, construction and tourism, depends on external factors such as the weather and official holidays. The payment of wages, taxes, social benefits and dividends can be subject to temporary quarterly effects such as annual bonuses being paid in one month. Errors in measuring the timing and size of such events lead to errors in the measurement of quarterly growth.

Work-in-progress

• 12.16Work-in-progress is incomplete output that is not yet ready for delivery. It occurs when production lasts more than one period. Long production cycles occur in activities such as agriculture, construction, manufacturing of machinery, cars and ships, and services like the development of software, architectural services, the making of a film or large sport events. Such long production processes are often accompanied by progress payments, occurring especially in activities such as shipbuilding, aircraft construction, wine production and advertising contracts.

• Measurement of such production requires that a single process is split into separate periods. This is more difficult for quarterly national accounts than for annual national accounts. However, the same principles apply for measuring work-in-progress on a quarterly and on an annual basis.

Activities concentrated in specific periods within a year

• 12.17Allocation of output on the basis of costs incurred over time is the normal means of allocating eventual output to periods on an accruals basis, but does not always apply in full. No output should be allocated to periods in which there is no ongoing production process, even if there are ongoing costs. This applies to the cost of using capital, for example rental payments for the use of machinery. This situation can apply to agriculture, where there may be no production in some periods. Periods with no output can also arise in food processing industries that are dependent on products from harvests.

Low-frequency payments

• 12.18For an activity occurring throughout the year, low-frequency payments are payments made once a year, or infrequent instalments over the year. Examples of such payments are dividends, interest, taxes, subsidies and employee bonuses, such as end-of-year bonuses and vacation bonuses. All such distributive transactions are recorded on an accrual basis, when the claim arose rather than when it was paid. This issue of timing of recording also occurs in annual national accounts, when payments may partly relate to another accounting year.

• 12.19In order to deal with such timing issues, two categories of payments are distinguished.

• (a) Payments that have a purely ad hoc character are to be recorded in the period in which they are actually made. Dividends, for example, are usually determined only after the books are closed on a fiscal year and may not relate to the company's profits over that year.

• (b) Payments that have a fixed relation to a particular period (e.g. accrued in a previous period or accrued over a number of accounting periods) are to be allocated to the periods in which they accrued. Examples are taxes on income and products, that may be collected in a subsequent period.

• 12.20The application of accrual principles to quarterly data in such cases may be extremely difficult, and alternative methods are necessary, such as a cash adjusted basis, or allocating accrual payments to periods so that there is minimal distortion of the characteristics of time series.

Flash estimates

• 12.21Quarterly national accounts provide an overview of the state of the economy with a short delay after the end of the reference quarter. The timely availability of such information helps to identify and interpret economic trends. For this reason, flash estimates of key macroeconomic aggregates including GDP growth and quarterly national accounts indicators are compiled more frequently by statistical authorities.

• 12.22A flash estimate is an early estimate of an economic variable for the most recent reference period. The flash estimate is normally calculated on incomplete data, but using the same statistical or econometric model as for regular estimates. The compilation of flash estimates incorporates as much data as possible. The differences between flash estimates and traditional estimates are as follows:

• (a) timeliness: flash estimates are available earlier than the traditional estimates;

• (b) accuracy: there is a trade off between timeliness and accuracy. Flash estimates are in general more prone to revision than the traditional ones;

• (c) coverage: the number of variables covered by flash estimates is more limited than traditional estimates;

• (d) information: flash estimates are based on less information. Often the information for traditional estimates is not fully available;

• (e) estimation method: due to the lack of data, flash estimates rely more on econometric methods and assumptions.

Balancing and benchmarking of quarterly national accounts

• 12.23Quarterly national accounts are a coherent set of accounts compiled on a quarterly basis. They are an integral part of the national accounts framework and are consistent with annual accounts.

• 12.24The internal consistency of quarterly accounts is achieved by reconciling estimates of supply and use for the accounts on a quarterly basis. The consistency with annual accounts is ensured either by benchmarking quarterly accounts to annual accounts or by deriving annual accounts from quarterly accounts.

Balancing

• 12.25The balancing or reconciliation process is an integral part of the compilation process of national accounts. It makes optimum use of the diverse sources of information underpinning different measures in the accounts. In broad terms, balancing seeks to fit the statistical basic data underlying the different approaches to the compilation of GDP and the other parts of the accounts into a supply and use framework, and so use all the available information in an effective manner.

• 12.26The principles and procedures of the balancing process applied to annual accounts apply to quarterly accounts, with additional procedures reflecting the quarterly frequency of compilation. Such additional procedures reflect the following features of quarterly accounts:

• (a) maintaining consistency between seasonally adjusted and unadjusted data;

• (b) ensuring consistency between current price and volume measures;

• (c) reconciling measures from the different approaches to the compilation of GDP.

• A simplified quarterly supply and use framework will help in balancing quarterly national accounts. When annual supply and use tables are regularly compiled, information in the quarterly supply and use tables can be explicitly linked to them as part of the balancing and benchmarking process.

Consistency between quarterly and annual accounts — benchmarking

• 12.27The process of alignment of quarterly accounts to annual ones can be approached in two ways:

• (a) aligning quarterly accounts to annual accounts, also known as benchmarking;

• (b) deriving annual accounts from quarterly accounts.

• 12.28Discrepancies between quarterly and annual accounts are mainly due to differences in sources, and availability of information from shared sources.

• 12.29Many different methods can be used for reconciling quarterly and corresponding annual aggregates.

• The ideal method is to identify the causes of the differences and to derive new, reconciled quarterly and annual aggregates using all available information.

• Benchmarking techniques ensure consistency between the two sets of aggregates by taking one as the standard and adapting the other to be consistent with it, through a variety of methods from simple mathematical adjustments to complex statistical and econometric procedures. Benchmarking techniques aim to ensure the accounting coherence of the two sets of aggregates in terms of preservation of movements or other well-defined criteria.

• Benchmarking is an integral part of the compilation process and should, in principle, be conducted at the most detailed compilation level. In practice, this may imply benchmarking different series in stages over time, where data for some series, which have already been benchmarked, are used to estimate other series, followed by a second or third round of benchmarking.

• 12.30When quarterly aggregates are taken as the benchmark, annual aggregates are derived by adding the appropriate quarterly figures. In this way, consistency is ensured.

• 12.31Very often, the reconciliation between quarterly and annual aggregates results from a mix of benchmarking approaches: for example, preliminary annual estimates can be derived by aggregating quarterly figures, and, once annual information becomes available and the annual aggregate is revised, the annual benchmark is applied to revise the corresponding quarterly figures.

Chain-linked measures of price and volume changes

• 12.32For annual national accounts, the measure of price and volume changes is in principle through an annual chain index. For the sake of coherence, the quarterly measures of price and volume changes are constrained to the annual chain-linked measures.

• 12.33Consistency between quarterly and annual accounts price and volume measures requires either that the annual measures are derived from quarterly measures or that the quarterly data is constrained to the annual using benchmarking techniques. This is true even if the basic requirement is met that the quarterly and annual measures are based on the same methods of compilation and presentation, for example using the same index formula, base year and reference period. Strict consistency is not possible because quarterly indices will not normally reflect exactly the same growth as the corresponding annual indices, due to the index mathematical form.

• 12.34Whilst quarterly chain-linked volume measures could be based on quarterly frequency of chain linking, chain linking is in principle to be carried out annually. Quarterly volume measures are annually chain linked.

• 12.35Quarterly national accounts chain-linked volume series are quarterly volume changes using the annual averages of prices of the previous year. Three approaches for annually chain linking quarterly volume indexes may be used:

• (a) annual overlap;

• (b) one-quarter overlap;

• (c) over-the-year approach.

• Creating a time series by applying one of the three chain-linking techniques normally induces structural breaks in the resulting chain-linked series, the impact of which is determined by the chosen linking approach and by the change of the price structure over time.

• 12.36The annual overlap approach uses the annual average values of the respective previous year in prices of that year. It results in annual aggregates of quarterly volume measures identical to the independently derived chain-linked annual national accounts series. Moreover, the quarter-on-quarter rates of change within the same calendar year between Q1 and Q 4 are not affected by breaks. However, the volume series is affected by breaks occurring from the fourth quarter of a year to the first quarter of the following year, which also appear in the respective quarter-on-quarter rate of change.

• 12.37By contrast, the one-quarter overlap approach generally leads to undistorted quarter-on-quarter rates of change for all quarters of the year, since the chain links refer to the quantities of the fourth quarter of the respective previous year valued at average prices of that year. However, unlike the annual overlap approach, the one-quarter overlap approach leads to quarterly chain-linked series which are not consistent with the independently derived chain-linked annual national accounts series.

• 12.38The over-the-year approach of chain linking leads to undistorted year-on-year growth rates for all quarters, since the chain links refer to the volumes of the same quarter in the respective previous year, valued at average prices of that year. However, this approach leads to results that are affected by structural breaks in every quarter, so that each quarter-on-quarter rate of change is affected by a break. Hence, the over-the-year approach impacts most on the intra-annual profile of a series.

• 12.39Provided the substitution effects (changes in volumes due to shifts in price structure) within a year are small, the three approaches for quarterly chain linking of volumes lead to very similar results.

• Based on practical considerations such as quarterly growth consistency with annual chain-linked growth and simplicity and transparency of computation, the annual overlap method is the recommended method.

Seasonal and calendar adjustments

• 12.40Seasonality is any pattern that recurs on a regular basis within the same period of each year.

• An example is the sale of ice cream in the summer. Regularly recurring events are smoothed over the year by adjusting for seasonality, whereas the impact of irregular events remains unaffected. Adjusting for seasonality includes allowing for the different lengths of months and quarters. The seasonally adjusted results reflect 'normal' and recurring events over the whole year in which they occur. Seasonally adjusted series reveal more clearly than unseasonally adjusted series the following features for example:

• (a) changes in trend; and

• (b) turning points in the business cycle.

• 12.41The calendar effect is the impact on a time series of the following:

• (a) the number and composition of working and trading days;

• (b) the occurrence of fixed and moving holidays;

• (c) leap years and other calendar phenomena such as bridging days.

• 12.42The presence of seasonal and calendar effects in quarterly national accounts time series obscures the trend in growth of quarterly national accounts aggregates. So, adjustments for seasonal effects and calendar effects assist in the drawing of inferences on trends from quarterly national accounts; furthermore, seasonal adjustment reveals the impact of major irregular effects or events to help in understanding economic developments through the quarterly national accounts statistics.

• 12.43Seasonal variations are commonly the effect of variations in energy use, tourism activity, weather conditions that affect outdoor activity such as construction, salary bonuses and fixed holidays effects, as well as all kinds of institutional or administrative practices. Seasonal variations in quarterly national accounts depend also on the data sources and compilation methods used.

• 12.44For a reliable estimation of seasonal factors, the time series may need to be pre-treated. This prevents outliers such as impulse outliers, transitory changes and level shifts, calendar effects and national holidays from affecting the quality of the seasonal estimates. However, outliers should remain visible in the seasonally adjusted data unless they are the result of errors, because they may reflect specific events such as strikes, natural disasters, etc. Therefore the outliers should be reintroduced into the times series after the seasonal components have been estimated.

Sequence of compilation of seasonally adjusted chain-linked volume measures

• 12.45The compilation of seasonal and calendar adjusted quarterly national accounts chain-linked volume measures is the result of a sequence of operations including seasonal and calendar adjustment, chain linking, benchmarking and balancing, applied to the available basic or aggregated information.

• 12.46The sequence of application of the different steps of the compilation process of seasonally adjusted chain-linked quarterly national accounts volume measures depends on the specificities of the production process and on the level of aggregation at which it is applied.

• Ideally, seasonally adjusted chain-linked volume series are obtained by seasonally adjusting the chain-linked series, followed by a benchmarking of the adjusted chain-linked series.

• 12.47There are quarterly national accounts compilation systems in which seasonally adjusted data are produced at a very detailed level, and even at a level at which no chain linking is applied, e.g. when producing quarterly national accounts from quarterly supply and use tables. The order in this case is seasonal adjustment, followed by balancing, chain linking and benchmarking. At a disaggregated level, the estimates of the seasonal component may not be as reliable as at higher quarterly national accounts levels. Particular care is then needed for revisions of the seasonal component. Furthermore, balancing and chain linking seasonally adjusted data must not result in a seasonal pattern being introduced into the series.

• 12.48Quarterly national accounts volume measures in average prices of the previous year can be chain linked by using the one-quarter-overlap, the annual overlap or the over-the-year technique. From the perspective of seasonal adjustment of quarterly national accounts volume measures, the one-quarter-overlap and the annual overlap technique are preferred. The over-the-year-technique is not recommended as it can introduce breaks in every single quarter-on-quarter movement of the series.

• 12.49Seasonally adjusted chain-linked quarterly volume measures are constrained to the respective non-seasonally adjusted chain-linked annual data by using benchmarking or constraining techniques that minimise the impact on the quarter-on-quarter changes of the series. The benchmarking is required for purely practical reasons, e.g. the consistency of annual average growth rates. Benchmarking shall not result in introducing a seasonal pattern in the series. The reference should be the independently derived chain-linked annual series in unadjusted form for only seasonally adjusted quarterly national accounts. Exceptions from the desired consistency over time are acceptable if the seasonality is changing rapidly.

• 12.50The calendar effect can be divided into a seasonal and a non-seasonal component. The former corresponds to the average calendar situation that recurs each year at the same season; the latter corresponds to the deviation of the calendar variables, such as numbers of trading/working days, moving holidays and leap year days, from the month- or quarter-specific average.

• 12.51Calendar adjustment removes those non-seasonal calendar components from the series, for which there is statistical evidence and an economic explanation. Calendar effects, for which a series are adjusted for, should be identifiable and sufficiently stable over time or, alternatively, it should be possible to model their changing impact over time appropriately.

CHAPTER 13

REGIONAL ACCOUNTS

INTRODUCTION

• 13.01This Chapter describes regional accounts in general and clarifies the purposes and major conceptual principles and compilation issues typical for regional accounts.

• 13.02 Definition: regional accounts are a regional specification of the corresponding accounts of the national economy. Regional accounts provide a regional breakdown for major aggregates such as gross value added by industry and household income.

• 13.03National accounts concepts shall be used for regional accounts unless indicated otherwise in this Chapter.

• National totals hide differences in regional economic conditions and performances. Population and economic activities are generally unevenly distributed among regions. Urban regions are generally specialised in services, while agriculture, mining activities and manufacturing tend to be located in non-urban regions. Major issues such as globalisation, innovation, ageing, taxation, poverty, unemployment and the environment often have a regional economic dimension. Regional accounts are, therefore, an important complement to national accounts.

• 13.04Regional accounts comprise the same set of accounts as national accounts, in that they make regional economic structures, developments and differences visible. Conceptual and measurement problems result in a set of accounts for regions which are more limited in scope and detail than national accounts.

• The tables on regional production activities by industry show:

• (a) the size and the dynamic of production and employment by region;

• (b) the contribution of regions to national aggregates;

• (c) the specialisation of each region;

• (d) the role of the various regions for each industry.

• Regional household income accounts show primary and disposable household income by region, as well as the sources and distribution of income amongst regions.

• 13.05In several Member States, regions at various levels have a substantial autonomy of decision-making. Regional accounts corresponding to such regions are, therefore, important for national and regional policy.

• 13.06Regional accounts also serve important specific administrative purposes, e.g.:

• (a) to allocate the revenues of a specific national tax to regional governments;

• (b) to allocate funds as part of European cohesion policy.

• 13.07Regional accounts can be used flexibly at various levels of aggregation. This does not only correspond to geographic regions. Geographic regions can also be grouped by economic structure, location and economic relationships with other (neighbouring) regions. This is in particular useful for analysing national and European economic structures and development.

• 13.08Regional accounts shall be compiled on the basis of regional data collected directly, and national data with regional breakdowns based on assumptions. The more complete the data collected directly, the less the role of assumptions. The lack of sufficiently complete, timely and reliable regional information requires assumptions in compiling regional accounts. This implies that some differences between regions are not necessarily reflected in regional accounts.

REGIONAL TERRITORY

• 13.09A regional economy of a country is part of the total economy of that country. The total economy is defined in terms of institutional units and sectors. It consists of all the institutional units which have a centre of predominant economic interest in the economic territory of a country (see paragraph 2.04). The economic territory does not coincide exactly with the geographic territory (see paragraph 2.05). The economic territory of a country is divided into regional territories and the extra-regio territory.

• 13.10The regional territory consists of that part of the economic territory of a country that is directly assigned to a region, including any free zones, bonded warehouses and factories.

• 13.11The extra-regio territory is made up of parts of the economic territory of a country which cannot be assigned to a single region. It consists of:

• (a) the national air-space, territorial waters and the continental shelf lying in international waters over which the country enjoys exclusive rights;

• (b) territorial exclaves (i.e. geographic territories situated in the rest of the world and used, under international treaties or agreements between states, by general government agencies of the country — embassies, consulates, military bases, scientific bases etc.);

• (c) deposits of oil, natural gas etc. in international waters, outside the continental shelf of the country, worked by resident units.

• 13.12The NUTS classification provides a single, uniform breakdown of the economic territory of the European Union. For national purposes, regional accounts may also be compiled at a more detailed regional level.

UNITS AND REGIONAL ACCOUNTS

• 13.13Two types of units are distinguished for the national economy. First, records for the institutional unit reflect flows affecting income, capital and financial transactions, other flows and balance sheets. Second, records for the local kind of activity unit (local KAU) show flows occurring in the process of production and in the use of goods and services.

Institutional units

• 13.14For regional accounts, depending on the regional level, two types of institutional units can be distinguished:

• (a) Uniregional units, where the centre of predominant economic interest is in one region. Examples of uniregional units are households, corporations the local KAUs of which are all located in the same region, most local and regional governments, part of social security and NPISHs.

• (b) Multiregional units, where the centre of predominant economic interest is in more than one region. Corporations and NPISHs are examples of units which span regions. Other examples are institutional units whose activities span the whole country, such as central government and a small number of corporations exercising monopolies or near-monopolies.