A Framework for Monitoring Economic Development: Datasets of Interest

1. A Framework for Monitoring Economic Development:Datasets of Interest Rob Edwards Inter-regional Adviser, United Nations Statistics Division International Forum on Monitoring National Development: Issues and Challenges 27-29 September 2011, Beijing, China

2. Session Outline • What is “economic growth”? • Measures of GDP • Reformulation of the drivers of GDP growth • Relevant datasets • The challenge

3. What is “economic growth”? (1) • This presentation follows on from discussions of comparative advantage and factor endowments in the context of the theory of growth identification and facilitation • It is in this context that I am defining “economic growth” as the growth in total GDP (nominal and volume) and in GDP per capita • Also of interest are the drivers of economic growth and the changing industry composition of the economy

4. What is “economic growth”? (2) • Stiglitz, Sen and Fitoussi argue that GDP can only be the starting point for assessing economic performance and social progress • We need to keep in mind that: • some incomes generated from production are payable overseas • changes in the terms of trade can have significant impacts on national disposable income • GDP is a “gross” concept --- we need to allow for depreciation ( and, ideally, for depletion of natural resources used up in production) • there are many other dimensions to social progress beyond economic growth considerations, e.g. health, education, security and opportunity

5. Measures of GDP • Expenditure approach • Production approach • Income approach • Key point --- supply/use tables and/or input-output analyses are extremely useful in reconciling the various measures • The availability of supply/use and/or input-output tables will also position the NSO to be able to inform on many other dimensions of economic and environmental issues of concern

6. Expenditure-based GDP • Final consumption expenditures of households, general government and non-profit institutions serving households • Gross capital formation of all institutional sectors (includes changes in inventories) • Exports of goods and services less imports of goods and services Typically presented in nominal and volume terms

7. Production-based GDP For all industries --- Value of output Less Intermediate consumption Plus Taxes less subsidies on products Typically presented in nominal and volume terms

8. Income-based GDP Compensation of employees Plus Gross operating surplus Plus Gross mixed income Plus taxes less subsidies on products Typically presented in nominal terms only

9. Drivers of GDP (1) GDP in volume terms can be thought of in terms of the following identity: GDP(V) = E*LP Where --- E = average number of persons employed over the period LP = labor productivity, derived as GDP(V) divided by average number of persons employed over the period Put another way, GDP growth results from employment growth and increasing labor productivity

10. Drivers of GDP (2) • The persons employed and the labor productivity represent some of the “endowments” that a country has at any given point in time • The persons employed have a combination of skills, knowledge and experience (quantity and quality dimension) • Economy-wide labor productivity is a function of the labor productivity within individual industries, and the compositional mix of industries (both change over time) • The underlying sources of increases in labor productivity are the accumulation of skills in the labor force, effective deployment of supportive capital stock, and technological progress

11. Drivers of GDP (3) • The theory of growth identification and facilitation focuses on identifying opportunities for economies to grow by: • identifying industries that are in line with a country’s latent comparative advantage, based on finding comparator countries with similar factor endowments whose per capita GDP is up to 3 times the level of the country; and • targeting through industry-specific measures binding constraints to faster growth and employment creation

12. Datasets of Interest (1) • If official statistics are to inform on growth identification and facilitation as described above, some key datasets are needed : • GDP (preferably all three measures) and its components • Price deflators so that volume measures can be compiled (output and input prices) • Industry decomposition of GDP (including the informal sector, which is of interest in its own right) • Highly desirable --- supply/use and/or input-output tables

13. Datasets of Interest (2) • Population • Persons employed by industry • Labor productivity by industry • Commodity production by industry • Exports and imports by industry

14. Datasets of Interest (3) • Catalysts for productivity change: • Capital stock and capital services by industry • Labor inputs by industry • Labor and capital price indexes • Industry characteristics (number of businesses, entries and exits, firm size, domestic/foreign owned, etc) • R and D, innovation • Inwards and outwards foreign direct investment by industry

15. Datasets of Interest (4) • Labour supply data, including: • Persons employed/unemployed • Age structure • Skills/education levels • Health status • Wages (Note: If wage-price inflation is to be avoided, wage growth must be supported by productivity improvements)

16. Datasets of Interest (5) • Other “endowments” of the economy: • Natural resource base of the economy • “Hard” infrastructure (transportation, information and communication, water and sanitation) • “Soft” infrastructure (social cohesion, inequality, institutional capacity, business environment)

17. Datasets of Interest (6) • Relevant government finance statistics to monitor government industry and other interventions --- data classified by purpose needed • Household survey data so that the welfare outcomes of macro-level developments can be monitored • As appropriate, regional data may be needed for some of the datasets identified above

18. The Challenge • The datasets identified above comprise a rich array of statistics • For many developing countries of interest the datasets may well not be available, or not be available in the detail desired • We have a big challenge ahead

19. Thank You