Chapter3 Sources and Estimates for Historical GDE

(GDP by Expenditure Approach)

As shown by Table 2, estimating the historical data of GDE is similar to the case of historical GDP, and it also involves adjusting and supplementing past statistical data of NMP used, or NI income used (expenditure approach NI). GDE (expenditure approach GDP) consists of three parts: final consumption expenditure (including household consumption expenditures and government consumption expenditures), gross capital formation (including gross fixed capital formation and changes in inventories), and net export of goods and services (equal to the difference between the values of exports and imports). Expenditure approach NI consists of three parts also: total consumption (including household consumption and social consumption), total accumulation (including accumulation of fixed assets and accumulation of flowed assets), and net exports of goods (equal to the difference between the values of exports and imports).




3.1 Final consumption expenditure




    3.1.1 Household consumption expenditure

    Household consumption expenditure in GDE refers to the total final consumption expenditure on goods and services by households during a certain period. Apart from consumption expenditures on goods and services directly purchased in cash, household consumption expenditure includes other forms of consumption expenditures, i.e., imputed consumption expenditure. Imputed household consumption expenditure consists of goods and services provided by units in the form of income in kind and transfers in kind to laborers, goods and services produced and consumed by households themselves, services for private housing, financial intermediary services provided by banks and insurance services provided by insurance companies.

    Household consumption expenditure in NI refers to the total final consumption expenditure on goods by households during a certain period. It includes the consumption expenditure on goods purchased in cash, values of goods provided by units in the form of income in kind and transfers in kind to workers, values of goods produced and consumed by household themselves, and the value of goods calculated according to payments of non-material service by household.

    Household consumption expenditure in GDE includes the total expenditure on non-material services by households, while in NI used it includes only the value of goods put into non-material service activities by households and it does not include the value of non-material goods put into wages and profits, and so on. So the household consumption expenditure in GDE is the household consumption expenditure in NI, plus values of non-material goods consumed by households, included in non-material service activities. The data can be obtained from the people's expenditures on material goods and cultural life in money balance sheets of households.



    3.1.2 Government consumption expenditure

    This refers to consumption expenditure on public services that the government provides for society and net expenditure of goods and services provided by the government to households free or at low prices. The first item is the difference between the value of output of government services and operating revenues received by the government. The value of output of the government is calculated as the sum of the current expenditure plus depreciation of fixed assets. The second item is the difference between the market price of goods and services provided by the government to households and the price that the government charges households.

    According to the above-mentioned definition, the government consumption expenditure in GDE includes the total expenditure on values of goods and non-material services provided by the government, but the social consumption in NI only includes expenditures on goods, and does not include the above-mentioned non-material service prices. So the government consumption expenditure in GDE is the social consumption in NI, plus values of non-material services mentioned above. These data can be estimated by the proportion of expenditures on non-material services in the financial final accounts in the category items for every fiscal year.

    The government consumption expenditure in GDE includes depreciation of fixed assets which refers to implied depreciation for administrative units and those units financed fully or partly by budget allocation. The approaches to collecting data and compiling estimates of implied depreciation for these units are similar to depreciation of fixed assets in value added.






3.2 Gross capital formation




    3.2.1 Gross fixed capital formation

    This refers to the value of fixed assets purchased, transferred in and produced for own use by residents during a certain period, minus the value of fixed assets sold and transferred out by the residents.

    Between the gross fixed capital formation in GDE and the accumulation of fixed assets in NI used, the important distinction between concept and quantity is the difference between "gross value" and "net value," that is, the difference of depreciation. The gross fixed capital formation shows the total scale of investment in fixed assets, while the accumulation in fixed assets shows the net value of investment in fixed assets, which is obtained by subtracting basic depreciation and major maintenance funding from the total investment in fixed assets. So the gross fixed capital formation is the accumulation of fixed assets plus the depreciation of fixed assets.


    3.2.2 Changes in inventories

    This refers to the changes in the value of the inventories held by residents at market prices during a certain period, i.e., the difference between the values of opening inventories and closing inventories. It pertains to increases when it appears with a plus sign, and to decreases when with a minus. The inventories cover raw materials, fuels and other materials for reserve purchased during a certain periods; finished products, half finished products and works-in-progress which are produced during the period. Changes in inventories can be estimated by directly using the accumulation of flowed assets in the total accumulation of NI.






3.3 Net exports of goods and services

Net exports in GDE (expenditure approach GDP) refer to the difference between the values of exports and imports for goods and the same difference for non-material services. The net exports in expenditure approach NI refers only to the former, while the net export of goods in expenditure approach GDP can be obtained by directly collecting corresponding data in NI. The net exports of non-material services refers to the value of non-material services, i.e., passenger transport, education, consultation, advertising and banking and insurance provided to non-resident units and obtained from abroad. These values can be estimated by using data on net exports of goods from 1952-1978, and the corresponding ratio of net exports of non-material services to net exports of goods since 1981.