Introduction to National Accounts Workshop MODULE VII: Institutional Sector Accounts

1. Introduction to National Accounts WorkshopMODULE VII: Institutional Sector Accounts November 11th to 21th 2013 Courtyard Bridgetown, Barbados

2. OBJECTIVES • Agents in the economy • Institutional Units • Why institutional Sector Accounts?

3. Agents in the Economy • Institutional Unit and Sectors • Establishments and Industries

4. Institutional units • An economic entity capable, in its own right, of • Owning 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

5. Institutional units • Two types of Institutional units • Households • 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.

6. 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

7. Why sectors? Production and goods and services account completely explain what is produced and who uses production Does not explain how income earned is available to those who consume Does not show role of government, as well as the financial position of gov’t…surplus or deficit Does not give a full picture of wealth, its evolution or allocation, loans, indebtedness

8. Institutional units Households Legal and social entities Corporations NPIs Government units

9. All have different economic objectives Households - consume Corporations - produce to make a profit for their owners NPIs - produce for other objectives Government - produces and consumes on behalf of the community at large Acts to redistribute income and wealth

10. Institutional sectors • Grouping of institutional units according to primary function and economic behavior • Non-financial Corporations • Financial Corporations • General Government  • Households • Non-Profit Institutions Serving Households (NPISH) (Rest of the World (ROW))

11. 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.

12. Corporations • Specific 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)

13. Quasi-corporations • Unincorporated enterprises that behave as corporations • owned 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.

14. Non-financial corporations • Corporations and quasi-corporations whose principal activity is the production of market goods and non-financial services • Market NPIs

15. Non-financial corporations: sub-sectors • Public non-financial corporations • National private non-financial corporations • Foreign controlled corporations • Control evidenced by • Majority ownership • Ability to make decisions

16. 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)

17. 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

18. 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

19. General government: subsectors Two alternatives •  One • Central government • State & local governments • Social security •  Two • Central government (including social security) • State & local governments (including social security if applicable)

20. Public sector Composition: • General government  • Public Non-financial corporations  • Public Non-financial sector (1+2)  • Public financial corporations  • Public sector (1+2+4)

21. Household sector Resident Households: • Individual or groups that • Live together • Pool resources  • Supply labor, capital • Consume • Produce

22. NPIs • Non-profit institutions (in a legal sense): • Producers of goods and services • Cannot be a source of income or profit to those who own or control them •  Financed by • Government transfers • Membership fees • Grants

23. NPIs • Market NPIs • Serving Business • Produce at economic significant prices  Corporate sectors • Non-market NPIs • Controlled and mainly financed by government  General government sector •  All other non-market NPIs NPISH • Trade unions, political parties, churches, sports clubs • Charities

25. Sector Net Lending / Net Borrowing

26. End of Module