Archive:Regional accounts background

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Regional accounts give a detailed picture of a region’s economy and are a major information source for people who work in economic development and policy or who teach and study economics. The regional GDP is also the basis for the distribution of the European Union’s regional funds.

Introduction

In national accounts, economic activity can be measured in three different ways: from the production, income or expenditure sides.

Imagine national or regional accounts as a big family where the parents bake a strawberry cake and give a piece to each of their five children.

If you want to measure how much cake there is, you have three options. The first and easiest is to go to the kitchen and measure what ingredients the parents used to bake the cake. You measure how much flour, sugar and cream and how many eggs and strawberries were used. This is the production approach.

A second way would be to check how much cake each family member received — the income approach. This becomes a bit more complicated than just measuring everything in the kitchen. You have to go to each family member and measure how big the pieces really were. If you are lucky, everybody will tell you precisely how much he or she received. In real life, however, there are always people who under-declare their income.

The third way is to try and measure how much they ate — the expenditure approach. In principle you ask everybody how much cake they ate. However, maybe they do not remember exactly how much they ate. Maybe they saved some cake to eat later. Or maybe they traded cakes with the neighbour’s kids, who themselves received an apple pie, but prefer strawberry cake. Clearly measuring the level of expenditure is the trickiest option at the regional level, because trade between regions is in practice impossible to measure in a market such as the EU.

In national accounts the production, income and expenditure approaches are used in parallel and checked against each other. However, in regional accounts EU countries mostly use the production approach and to some extent the income approach to measure the total value of all goods and services produced in the regions. This is because all data are not always available at the regional level. One obvious example is how to measure imports from and exports to a region. Another is the flow of income between regions, as commuting can have a big impact on, for instance, received and paid compensation of employees in a region.

In theory the regional accounts should add up to the national figures. However, for many countries this is not always the case. Therefore, the regional figures are grossed up or down to the national totals. For example, if the regional figures add up to 98 % of the national total, all regional figures are adjusted by the same percentage in order to match the national totals at the end.

Regional GDP

The most important indicator of regional accounts is regional gross domestic product (GDP). However, the accounts include other types of data, like gross fixed capital investment, compensation of employees and employment.

At the European level, the regional GDP per inhabitant is the indicator which determines which regions are supported through grants from the EU budget. In principle those regions which have a GDP per inhabitant of less than 75 % of the EU average receive funding.

At the moment, the European system of accounts (ESA) 1995 requires regional accounts data to be compiled only in current prices. However, many users would like to have regional GDP also in volume, which excludes the effect of inflation. The advantage of data in constant prices is that the GDP growth in different regions over the years can also be shown.

Timeliness

The regional accounts figures are transmitted with a delay of 24 months at a European level and published after 26 months. The delay is caused by the fact that regional accountants have to wait for other statistics which they use as sources and the final national accounts figures, before they can release their own final figures.

In most Member States the backbone of regional GVA compilation is the structural business survey, which has a delay of 18 months. This means that in June 2014 the countries compile structural business survey data for 2012, and that they transmit regional GVA to Eurostat by December 2014.

Further Eurostat information

Publications

Regional Gross Domestic Product dropped sharply in 2009, but not all regions were hit in the same way - Statistics in focus 41/2012

Dedicated section

National accounts (including GDP)