Introduction to National Accounts Workshop

MODULE VII: Institutional Sector Accounts

November 11th to 21th 2013

Courtyard Bridgetown, Barbados

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OBJECTIVES

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Agents in the economyInstitutional UnitsWhy institutional Sector Accounts?

Agents in the Economy

Institutional Unit and Sectors

Establishments and Industries

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Institutional units

An economic entity capable, in its own right, ofOwning goods or assets

Incurring liabilities

Taking economic decisions and engaging in economic activities Responsible legally

Either has a complete set of accounts or it is meaningful to compile, if required

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Institutional units

Two types of Institutional unitsHouseholds

Legal or social entities separate from their owners.

Institutional units basis for all accounts (except for production and generation of income accounts).

Grouped into SECTORS.

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Enterprise

Enterprise An institutional unit in its capacity as a producer of goods and services.

An enterprise could be:Corporation (including quasi-corporation)

Non-profit institution

Unincorporated enterprise

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Why sectors?

Production and goods and services account completely explain what is produced and who uses productionDoes not explain how income earned is available to those who consumeDoes not show role of government, as well as the financial position of gov’t…surplus or deficitDoes not give a full picture of wealth, its evolution or allocation, loans, indebtedness

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Institutional units

HouseholdsLegal and social entitiesCorporationsNPIsGovernment units

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All have different economic objectives

Households - consumeCorporations - produce to make a profit for their ownersNPIs - produce for other objectivesGovernment - produces and consumes on behalf of the community at largeActs to redistribute income and wealth

Institutional sectors

Grouping of institutional units according to primary function and economic behavior

Non-financial Corporations Financial CorporationsGeneral Government Households Non-Profit Institutions Serving Households (NPISH)

(Rest of the World (ROW))

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Corporations

Legal entities created for the purpose of producing goods and services for the market, that may be a source of profit or other financial gain to its owner(s).

collectively owned by shareholders who have the authority to appoint directors responsible for the general management.

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CorporationsSpecific cases

Subsidiaries (under control of parent corporation)

Associates (some influence of other corporations)

Holding companies (parent corporation without significant production of its own)

Ancillary corporations (subsidiaries whose production is ancillary to the parent corporation)

Cooperatives (limited liability partnerships)

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Quasi-corporations

Unincorporated enterprises that behave as corporationsowned by government

owned by households

owned by non-residents

De facto relationship is as a shareholder in a corporation

Keeping a complete set of accounts, OR

It would be meaningful to compile a complete set of accounts, if required.

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Non-financial corporations

Corporations and quasi-corporations whose principal activity is the production of marketmarket goods and non-financial services

Market NPIs

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Non-financial corporations: sub-sectors

Public non-financial corporations

National private non-financial corporations

Foreign controlled corporations

Control evidenced byMajority ownership

Ability to make decisions

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Financial corporations

All institutional units principally engaged in financial intermediation or closely related activities.

Provide financial services by incurring liabilities and acquiring financial assets

Providing services related to financial intermediation (auxiliary services)

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General government

Unique kind of legal entities that have legislative, judicial or executive authority over other institutional units within a given area

Functions:Provision of non-market goods & services for collective and individual consumption

Redistribution of income and wealth

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General government: scope

Units of central, state, and local government

Social security funds

Non-market NPIs controlled and mainly financed by government units

Exclude public quasi-corporations

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General government: subsectors

Two alternatives One

Central governmentState & local governmentsSocial security

 TwoCentral government (including social security)State & local governments (including social security if applicable)

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Public sector

Composition:

1. General government 

2. Public Non-financial corporations 

3. Public Non-financial sector (1+2) 

4. Public financial corporations 

5. Public sector (1+2+4)

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Household sector

Resident Households:

Individual or groups thatLive together

Pool resources 

Supply labor, capital

Consume

Produce

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NPIs

Non-profit institutions (in a legal sense):

Producers of goods and servicesCannot be a source of income or profit to those who own or control them

 Financed by

Government transfers Membership feesGrants

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NPIs

Market NPIsServing BusinessProduce at economic significant prices

Corporate sectors

Non-market NPIsControlled and mainly financed by government

General government sector

 All other non-market NPIs NPISH

Trade unions, political parties, churches, sports clubsCharities

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Sector Net Lending / Net Borrowing

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End of Module

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