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Regional GDP Workshop

This workshop aims to explore the methodology and challenges of measuring regional GDP, including the use of direct and indirect approaches, the identification of suitable data sources, and the compilation of estimates. Participants will also discuss the concepts and classifications related to statistical units, residency, regions, and industries.

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Regional GDP Workshop

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  1. Regional GDP Workshop

  2. Purpose of the Project

  3. Regional GDP Scope • Annual • Current price (nominal) GDP • By region and industry • Using the production approach October 6 2005 - Regional GDP Workshop

  4. Components of GDP Intermediate Consumption Compensation of Employees Operating Surplus and Consumption of Fixed Capital Net Indirect Taxes Output October 6 2005 - Regional GDP Workshop

  5. How to measure regional GDP Two main approaches • Indirect Uses a variable with a regional dimension correlated with GDP, e.g. • employment numbers • wages paid October 6 2005 - Regional GDP Workshop

  6. 2. Direct • Based on direct surveying of units and their transactions. • Builds up GDP in the same way that the national accounts are compiled. October 6 2005 - Regional GDP Workshop

  7. Issues With Direct Approach • Units with regional dimension needed • Complex • Depends on data availability • Heavy data requirements • More expensive than alternatives • Not particularly timely • Still preferred method though October 6 2005 - Regional GDP Workshop

  8. The Direct Approach Direct is preferred because • It reflects national accounts methods • Allows estimation by unit • Avoids assumptions such as constant employment to value added ratios • Allows us to compile individual aggregates by summing source data • We have the data (AES) October 6 2005 - Regional GDP Workshop

  9. What method do we choose? • No existing economic collection is completely suitable for estimating regional GDP • Method will be data driven • We are assessing • What source data might be suitable • Where the gaps are • Costs of filling the gaps • The most appropriate methodological choice October 6 2005 - Regional GDP Workshop

  10. Deliverables & Timing

  11. Main Stages October 6 2005 - Regional GDP Workshop

  12. Data Evaluation • Identify potential regional GDP data (regional / economic) • Evaluate and list characteristics • Many economic data sources not designed regionally – but still evaluated • Many regional data sources not on a National Accounting basis October 6 2005 - Regional GDP Workshop

  13. Methodology • Review international best practice • European Statistical Commission (Eurostat) – also prefers ‘direct’ approach • Concepts and classifications • Integrate data evaluation and methodology review October 6 2005 - Regional GDP Workshop

  14. Compilation • Follow the “road map” • Compile estimates • Analyse and compare estimates • Quality assessment important as there should be “something” produced • Determine how weak areas can be improved October 6 2005 - Regional GDP Workshop

  15. Final Report • Feasibility of producing regional GDP on an ongoing basis • Release depends on quality of regional GDP series • Future Recommendations depend on feasibility. If not feasible, the recommendations will focus on how the series could be made feasible October 6 2005 - Regional GDP Workshop

  16. Concepts & Classifications

  17. A brief look at the main concepts • Statistical unit • Residency • Region • Industry October 6 2005 - Regional GDP Workshop

  18. Statistical units • Enterprise An ‘owning’ unit making financial decisions on behalf of the producer units. • Kind of Activity Unit (KAU) Producer of goods and services which is classified to industries and from which financial information is collected. • Geographic unit (GEO) A ‘location’ unit at which economic activity is carried out. Does not have financial information. • Has employment related information. • Can be classified to region • Can be classified to industry October 6 2005 - Regional GDP Workshop

  19. What kind of unit do we need? • A production unit (KAU), but which can be located in a region • We’ll call it the Local KAU October 6 2005 - Regional GDP Workshop

  20. The Local KAU • Will be estimated from the regional information given by the GEO • Will have the same industry classification as its ‘parent’ KAU • Must have labour and/or capital October 6 2005 - Regional GDP Workshop

  21. Assumptions about statistical units • The existence of a GEO on our business register will be considered enough evidence for us to create a local unit • Where factors of production are identified but no corresponding stat unit exists, e.g. GEO, we will attempt to create a local KAU. October 6 2005 - Regional GDP Workshop

  22. Issues with Statistical Units • Local KAU. We don’t have one • Factors of production in one region but producer unit in another • Mobile equipment. What to do when capital assets move between regions • Fixed capital that spans regions • Capital intensive industries October 6 2005 - Regional GDP Workshop

  23. Residency • Residence concept • allocates value added to the region where the production unit is resident • based on the physical and legal existence of a unit in a region October 6 2005 - Regional GDP Workshop

  24. Residency contd … • Territory concept • Allocates activity to the region where it takes place • Reflects the activity of labour and capital operating in a region regardless of where the ‘owning’ production unit is located. October 6 2005 - Regional GDP Workshop

  25. Which residency concept to adopt? • We adopt the Residence principle. • Allows us to build up regional GDP using the direct method. • But … October 6 2005 - Regional GDP Workshop

  26. Creation of local KAUs • Where we identify factors of production we will establish local KAUs • So we identify activity taking place at particular locations – a territory concept! October 6 2005 - Regional GDP Workshop

  27. Issues with residency • NZ lacks a ‘local KAU’ in its statistical unit classification so assigning residency criteria can be difficult • Assigning residency to factors of production that move around • No ‘unit’ exists but factors of production are present. October 6 2005 - Regional GDP Workshop

  28. Special cases. Residency and Statistical Units • Special cases involve: • Multiregional activity • Factors of production in one region but owner/operator in another • What industry classifications do we want? • Mobile equipment. Capital assets moving between regions • Fixed assets that cross regions such as roads • Capital intensive industries October 6 2005 - Regional GDP Workshop

  29. Region • Propose 16 regions • 12 regional council areas • 4 unitary authorities • All regions treated equally in the study • Smaller regions a good test of feasibility October 6 2005 - Regional GDP Workshop

  30. North Island October 6 2005 - Regional GDP Workshop

  31. South Island October 6 2005 - Regional GDP Workshop

  32. Industry • Will test the feasibility of producing regional series by 30 industry groups • May have to aggregate to fewer groups depending on quality and confidentiality October 6 2005 - Regional GDP Workshop

  33. National Accounts published industries October 6 2005 - Regional GDP Workshop

  34. Data & Methodology

  35. Process to determine methodology • Several potential approaches possible. Direct (bottom-up) and Indirect (top-down) • Direct approach needs to be investigated October 6 2005 - Regional GDP Workshop

  36. Direct process • Evaluate potential data sources • Determine data source with most potential • No perfect data source out there. Need mitigation strategies to make data sources fit in better with regional GDP requirements October 6 2005 - Regional GDP Workshop

  37. Provisional Estimate • Unit record financial surveys (direct sources) often not particularly timely • Recognise there is demand for timely regional GDP estimates • Separate approach for timely ‘provisional estimates’ : lower quality, more aggregated October 6 2005 - Regional GDP Workshop

  38. Annual Enterprise Survey (AES) • Annual economic survey • Main National Accounts source for production side data by industry October 6 2005 - Regional GDP Workshop

  39. AES as a regional GDP source • Unit data available by industry – yes • Components of GDP – yes • Financial information – yes • National Accounting basis – yes • Regional collection – no • Meets residency condition - no October 6 2005 - Regional GDP Workshop

  40. AES: residency • Mitigation: investigate using separate unit data that to better apportion AES survey data across regions October 6 2005 - Regional GDP Workshop

  41. AES: collection design mitigation • Mitigation strategy: identify weak areas. Use alternative data sources. October 6 2005 - Regional GDP Workshop

  42. AES as a regional GDP source • Unit data available by industry – yes • Components of GDP – yes • Financial information – yes • National Accounting basis – yes • Regional collection – work around • Meets residency condition – model October 6 2005 - Regional GDP Workshop

  43. Regional Economic Indicator (REI) • Regionalised Business Activity Indicator (BAI) • Quarterly GST sales and purchases • Net GST sales as proxy for GDP, many conceptual differences though • Only released at regional level • AES preferred October 6 2005 - Regional GDP Workshop

  44. Role of Regional Economic Indicator • Possible back-up data source where there are gaps in AES coverage, or AES sample errors are high • Provisional estimate October 6 2005 - Regional GDP Workshop

  45. Linked Employer-Employee Data (LEED) • Links IRD administrative data with the SNZ Business Frame • Available later this year • Employment data (including salaries and wages) by industry by region October 6 2005 - Regional GDP Workshop

  46. Role of Linked Employer-Employee Data • Regional Compensation of Employees component (using salaries and wages) • Means to apportion AES data • Could also be used for regional GDP estimates where AES is weak • Provisional estimate October 6 2005 - Regional GDP Workshop

  47. Industry methodology review • AES proposed core data source • Gaps in coverage • Issues with mobile capital, networks etc • May be superior data sources for some industries • Review of methodology at the industry level required October 6 2005 - Regional GDP Workshop

  48. End

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