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Framework of Compilation of Regional (Governorate) Domestic Product

Framework of Compilation of Regional (Governorate) Domestic Product. UN-ESCWA 22 – 25 September 2007 Cairo. Regional Accounts.

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Framework of Compilation of Regional (Governorate) Domestic Product

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  1. Framework of Compilation of Regional (Governorate) Domestic Product UN-ESCWA 22 – 25 September 2007 Cairo

  2. Regional Accounts • Like the national accounts, Regional Accounts should provide an integrated and comprehensive set of estimates of macroeconomic aggregates like production, income, consumption and investment. • But development of regional accounts has lagged far behind, owing mainly to a number of conceptual, estimational and operational issues involved, which are not encountered in such serious form in national accounting.

  3. Regional Accounts – Main Problems • Regions within countries are open economies • constant flow of men, materials and means of transportation between regions • for which hardly any data are available. • Much need data are compiled only at the national level – thru sample surveys that do not produce reliable estimates at the sub-national levels. • Definition of ‘resident’ in the context of regional accounts.

  4. Aggregates Estimated at Regional Level • Owing to these problems, no country attempts full system of accounts at regional level. • Mostly, regional accounts are limited to estimation of production by industry, capital formation by broad categories of assets and rarely estimates of household and government consumption. • In this workshop, only estimation of production by industry would be attempted.

  5. Regional Accounts in UN-SNA • The UN-SNA does not make any specific recommendation about system of regional accounts. • It has left the countries to develop their own systems of regional accounts. • The 1993 SNA has identified three types of institutional units • Those with centre of interest in and most of its activities confined to one region • Multi-regional units with centre of interest in more than one region, but does not relate to the entire country. • Units functioning at a national dimension – whose centre of interest can not be attached to geographical domains of the country (Supra-regional sectors).

  6. The Concept of Regional Income • Regional Income or Regional Domestic Product (RDP) is a measure in monetary terms of the volume of all goods and services produced in the region or residents of the region during a given period of time (generally a year) accounted without duplication. • The estimates of Regional Income can be prepared by adopting two approaches, namely • income accruing and • income originating.

  7. Income Accruing Approach • Definition: The income accruing to the normal residents of a Region. • Since this measures the income that become available to the residents of a region, it provides a better measure of welfare of the residents of the state. • This corresponds to the concept of GNI at the national level. • But, this needs data on flows of factor incomes across the boundaries of the regions as well as flows to/from abroad. • The boundaries of regions being open to all kinds of economic transactions, it is very difficult to obtain data on flows of factor incomes to/from outside the region.

  8. Income Originating Approach • Definition: Income originating to the factors of production engaged in economic activities that are carried out within the geographical boundary of the region. • This represents the volume, in monetary terms, of gross/net value of goods and services produced within the region – Regional Domestic Product (RDP) current-price. • Corresponds to the concept of domestic product at the national level. • Most commonly used for regional accounting.

  9. Supra-regional Sectors • Certain economic activities, by their very nature are carried out cross regional boundaries. These are called ‘Supra-regional sectors’. • Examples: Railways, Communication, Banking & insurance, and federal governance. • Their economic contribution cannot be attributed to any one region or group of regions. • The estimates for these supra regional activities are compiled for the economy as a whole and allocated to the regions on the basis of relevant indicators.

  10. General Principles of RDP Compilation (1) • Regional economic territories should be clearly defined. For Iraq - Governorates • Ideally, the sum of regional-level estimates should be equal to the national-level estimates. • But, there are territories – extra-regional – that do not form part of any region like national air space, territorial waters, territorial enclaves (embassies) located outside the country. • Contribution of extra-regional territories are not included in RDP of any region.

  11. General Principles of RDP Compilation (2) • The data sets used for national level estimation should be used. • Methods – estimation, indicators/ indices for deflation / extrapolation – used for regional estimation should be the same as, or at least consistent with, those used for national level estimation.

  12. General Methodology of RDP Compilation • Mostly, one of the two methods – top-down and bottom-up – for an economic activity. • Bottom-up Method: Regional level estimates are independently arrived at from data collected at the unit level. • Top-down method: National level estimate is distributed over the regions using appropriate indicators. • In principle, priority is given to bottom-up method.

  13. Top-down Method (1) • This is used when only national level estimates are available, in case of economic activities like: • unscheduled road transport, retail trade (survey-base national level estimate & regional-level estimates not reliable) • Telecommunication (supra-regional) • When a volume or a quantity indicator is found most suitable, the current-price and constant-price national-level estimate is distributed over the regions. • The constant price /current-price estimate at regional level is derived from the current-price /constant price estimate, using a suitable price index or indicator, which is also used at national level.

  14. Top-down Method (2) • Examples of volume / quantity indicator: • Number of employees in the region for distributing CE, and volume of credit for distributing OS for banking; • Number of taxis in the region for unscheduled road transport; • Number of telephone connections in the region for telecommunication • Length of railway track in the region for railways

  15. We will now examine availability of Production-related statistics at the Governorate level

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