Delineation Between General Delineation Between General Government And Public Government And Public

CorporationsCorporations

Presentation Points

IMF Statistics Department

9th NBS-OECD Workshop On National Accounts

Xiamen, November 14-18, 2005

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Contents Of PresentationContents Of PresentationContents Of PresentationContents Of Presentation

Composition of Public Sector Institutional Units

– What is an institutional unit?– Types of institutional units

General Government Sector versus Public Corporations– General– Boundary issues

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Definition Of Public SectorDefinition Of Public SectorDefinition Of Public SectorDefinition Of Public Sector

System of National Accounts 1993:

The public sector consists of the national, regional, and local governments plus institutional units controlled by government units

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The Public SectorThe Public SectorThe Public SectorThe Public Sector

Public Sector

General government

Centralgovernment

Stategovernment

Public Corporations

Localgovernment

Financial Nonfinancial

Public depositarycorporations *

Other public financialcorporations

* Including central bank

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Institutional UnitInstitutional UnitInstitutional UnitInstitutional Unit

Institutional units are the basic building blocks of statistics describing income and financial transactions, other flows and balance sheets

The establishment is the unit used for the production account

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Definition Of An Institutional Definition Of An Institutional UnitUnit

Definition Of An Institutional Definition Of An Institutional UnitUnit

An economic entity that is capable, in its own right, of owning assets, incurring liabilities, and engaging in economic activities and in transactions with other entities

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Features Of An Institutional UnitFeatures Of An Institutional UnitFeatures Of An Institutional UnitFeatures Of An Institutional Unit

– Able to own assets– Able to take economic decisions and

engage in economic activity for which it is held responsible and accountable by law

– Able to incur liabilities on its own behalf and enter into contractual relationships

– Has a a complete set of accounts or it is possible and meaningful to compile a complete set of accounts if required

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Types Of Institutional UnitsTypes Of Institutional UnitsTypes Of Institutional UnitsTypes Of Institutional Units

Households Legal and social entities, such as

– Corporations– Quasi-corporations– Nonprofit institutions– Government units

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Types Of Institutional UnitsTypes Of Institutional UnitsTypes Of Institutional UnitsTypes Of Institutional Units

Corporations– Legal entities created for purpose of producing

goods & services for market

Quasi-corporations– Unincorporated enterprises that function as if they

were corporations– Must have a complete set of accounts and be

sufficiently self-contained and independent

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Types Of Institutional UnitsTypes Of Institutional UnitsTypes Of Institutional UnitsTypes Of Institutional Units

Nonprofit institutions (NPIs)– Legal or social entities created for purpose of

producing or distributing goods & services, but not a source of income or other financial gain for owners

Government units– Established by the political process– Carry out functions of government as primary

activity – Provide goods & services to the community or

households on a nonmarket basis– Redistributes income and wealth

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EstablishmentsEstablishmentsEstablishmentsEstablishments

An establishment is an enterprise, or part of an enterprise, situated in a single location at which only a single productive activity is carried out, or where principal productive activity accounts for most of the value added.

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Market And Non-market Market And Non-market EstablishmentsEstablishments

Within General GovernmentWithin General Government

Market And Non-market Market And Non-market EstablishmentsEstablishments

Within General GovernmentWithin General Government– A market establishment sells or otherwise

disposes of all or most of its output at economically significant prices

• Needs complete accounting records• Not necessarily completes balance sheet• Not engaging in financial transactions in its own

name

– Non-market establishments All other establishments General government has mostly nonmarket

establishments

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Definition Of Public SectorDefinition Of Public SectorDefinition Of Public SectorDefinition Of Public Sector

System of National Accounts 1993:

The public sector consists of the national, regional, and local governments plus corporations controlled by government units

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Government Control Of Another Government Control Of Another Unit Unit

Government Control Of Another Government Control Of Another Unit Unit

Defined in the 1993 SNA as the ability to determine general corporate policy

Proposed indicators are: Control of board or other governing body Control of the appointment and removal

of key personnel Control of key committees of the unit

Cont next slide

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Indicators Of Government Indicators Of Government Control Of Another UnitControl Of Another Unit

Indicators Of Government Indicators Of Government Control Of Another UnitControl Of Another Unit

Golden shares and options Regulation and control Control by a dominant customer Control arising from borrowing from the

government Ownership of a majority of voting interest

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Classification Of Public Sector Units Classification Of Public Sector Units Between General Government And Public Between General Government And Public

CorporationsCorporations

Classification Of Public Sector Units Classification Of Public Sector Units Between General Government And Public Between General Government And Public

CorporationsCorporations

Generally based on whether a unit sells its output at market prices

– If all or most of output is at market prices it is a corporation or quasi-corporation

– All other are government units

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Market PricesMarket PricesMarket PricesMarket Prices

Market prices for public units not always easy to identify

The criterion for distinguishing market from non-market prices is whether they are economically significant– That is the prices have a significant

influence on amounts producers are willing to supply and amounts purchasers are willing to pay

– Involves judgment after considering facts and circumstances

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Economically Significant PricesEconomically Significant PricesEconomically Significant PricesEconomically Significant Prices

Broad guidelines for economically significant prices– Do not have to be so high to cover all

costs of production to be economically significant.

– But must be high enough to be of significance in purchasing decisions and decisions to produce.

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““Quick” Decision TreeQuick” Decision Tree““Quick” Decision TreeQuick” Decision Tree

Who controls unit?

Private Public

What is Nature of Activities?What does it do?

Produce MarketG & S

Produce Non-Market G & S

Classify as:Public corporationQuasi-corporation

Classify as:Government unit

NPI controlled by govt.