ECON 215: INTRODUCTION TO THE ECONOMY OF GHANA 1

Transcription

1 ECON 215: INTRODUCTION TO THE ECONOMY OF GHANA 1 NATIONAL INCOME ACCOUNTING (PART 2) 1 Economy of Ghana Lecture Materials by Dr. Emmanuel Codjoe

2 What is national income accounting? How is this a useful exercise to the economy? What are benefits to the country? What are the difficulties encountered in preparing the national accounts? What are the limitations to its uses? 2 Economy of Ghana Lecture Materials by Dr. Emmanuel Codjoe

3 We noted that are fundamental aggregate statistics, and combined with other types of data provide other useful indicators to assess economic performance. 3 Economy of Ghana Lecture Materials by Dr. Emmanuel Codjoe

4 Nevertheless, there are many difficulties both conceptual and statistical in measuring the national income of a country accurately. 4 Economy of Ghana Lecture Materials by Dr. Emmanuel Codjoe

5 The problem of double counting: only final goods and services should be included in the national income accounting. But usually very difficult to distinguish between final and intermediate goods and services. 5 Economy of Ghana Lecture Materials by Dr. Emmanuel Codjoe

6 The problem of inadequate and unreliable statistics: reliable and accurate data are crucial in computing the. The accounts need to be honest, to be useful. 6 Economy of Ghana Lecture Materials by Dr. Emmanuel Codjoe

7 The treatment of non-monetary transactions: how to treat transactions, such as the services of housewives, services provided by family members, as well as unpaid family work. 7 Economy of Ghana Lecture Materials by Dr. Emmanuel Codjoe

8 Wages and salaries paid in kind: another related problem is that of payments made in kind for work done. These cannot be included in the national income accounts. 8 Economy of Ghana Lecture Materials by Dr. Emmanuel Codjoe

9 Wages and salaries paid in kind: but these payments in kind are supplements to wages and salaries on the income side. 9 Economy of Ghana Lecture Materials by Dr. Emmanuel Codjoe

10 Petty production: in Ghana, as in many developing countries, there are several economic activities that are classified as informal economic activities. 10 Economy of Ghana Lecture Materials by Dr. Emmanuel Codjoe

11 Petty production: associated with this is that of petty production by producers and distribution by retailers. Their production activities are invariably difficult to capture in the national accounts. 11 Economy of Ghana Lecture Materials by Dr. Emmanuel Codjoe

12 The underground economy: this consists broadly of illegal and undeclared transactions, especially where the goods and services are themselves illegal, such as drugs, smuggled goods, prostitution, etc. 12 Economy of Ghana Lecture Materials by Dr. Emmanuel Codjoe

13 The underground economy: this consists broadly of illegal and undeclared transactions, especially where the goods and services are themselves illegal, such as drugs, smuggled goods, prostitution, etc. 13 Economy of Ghana Lecture Materials by Dr. Emmanuel Codjoe

14 The underground economy: this consists broadly of illegal and undeclared transactions, especially where the goods and services are themselves illegal, such as drugs, smuggled goods, prostitution, etc. 14 Economy of Ghana Lecture Materials by Dr. Emmanuel Codjoe

15 Transfer payments: certain individuals receive a pension, allowances, grants and other transfers. Whilst they form part of individual incomes they are also part of government expenditures. 15 Economy of Ghana Lecture Materials by Dr. Emmanuel Codjoe

16 Transfer payments: these payments therefore create difficulties in the measurement of the national income. 16 Economy of Ghana Lecture Materials by Dr. Emmanuel Codjoe

17 Public services: another problem relates to the treatment of public services, like civil service administration, police, army, fire services, etc. It is very difficult to evaluate such services. 17 Economy of Ghana Lecture Materials by Dr. Emmanuel Codjoe

18 Government expenditures: a related problem is that of government expenditures. Because they are not voluntarily elicited nor priced in the market, they are valued at cost, which is the cost of labour. 18 Economy of Ghana Lecture Materials by Dr. Emmanuel Codjoe

19 Government expenditures: hence, the capital cost of the buildings and land used is not included in the expenditures undertaken by government. 19 Economy of Ghana Lecture Materials by Dr. Emmanuel Codjoe

20 Price changes: national income is the money value of goods and services. But this depends on prices, which often changes. Thus, price rises can give a higher value of national income when production is decreasing. 20 Economy of Ghana Lecture Materials by Dr. Emmanuel Codjoe

21 What are the limitations to its uses? Errors in measurement and unrecorded activities Inflation Does NOT Include Welfare Does not capture environmental damage 21 Economy of Ghana Lecture Materials by Dr. Emmanuel Codjoe

22 What are the limitations to its uses? Measurement excludes other indicators of social wellbeing, such as quality of life, equity Does not account for non-market production at the household, e.g., cleaning, childcare, laundry, etc. 22 Economy of Ghana Lecture Materials by Dr. Emmanuel Codjoe

23 What are the limitations to its uses? Subcategories may be misrepresented, e.g., what to include in consumption or government spending. 23 Economy of Ghana Lecture Materials by Dr. Emmanuel Codjoe

24 What are the limitations to its uses? Gray market activities, such the production and distribution of marijuana can be significant sources of sustenance in economies but are not included. 24 Economy of Ghana Lecture Materials by Dr. Emmanuel Codjoe