Q20101 National accounts revisions: Italian manufacturing productivity analysis Alessandro Faramondi Istat – National Statistical Institute of Italy Direzione Centrale Conti Nazionali

Q20102 Introduction (1) The National Accounts represent a wide array of data on areas as diverse as production, trade, earnings, etc... The nature of the National Accounts is that in principle all the activity is linked. The annual estimates of domestic product (GDP) and its components are subject to two types of revisions: routine and exceptional

Q20103 Introduction (2) The focus is on manufacturing productivity routine revisions. Productivity is defined as the ratio between a measurement of output produced and a measurement of one or several inputs used in the production process. The measurement of output considered is the value added, while the measurement of input is represented by labour input

Q20104 General approach to estimate manufacturing value added (1) The overall value added per economic activity is the result of the sum of the following productive segments: Market enterprises Market general government Non-market general government Market NPISHs Non-market NPISHs. We will consider only the method for estimating the value added for market productive segment because in the manufacture sector the other productive segments are irrelevant.

Q20105 General approach to estimate manufacturing value added (2) The statistical treatment of survey data of enterprises provides an initial estimate of value added per-capita (the per-capita value is the ratio between the value added and the enterprise workers) at producer prices coherently with the concepts and definitions of national accounts. The method is to giving to the full time equivalent units by industry and size class a specific value added per-capita. National Accounts domain is: NACE rev. 2 FOUR digits – 6 SIZE CLASS – LEGAL FORM

Q20106 Semi-final and final estimate of the value added The difference between the final estimate and the semi-final estimate is accounted for essentially by the sources, as the methodology (described below) is the same. In particular with regard to the sources, the data available in the semi-final year are made up of partial sources which have not yet been completed, in both the collection and checking/correction stage. Essentially the same sources are used for the semi-final year, yet still in the completion stage, as in the final year.

Q20107 Semi-final and final estimate of the value added - main sources - Small and Medium Enterprise Survey: the survey collects the economic account of enterprises with a maximum of 99 workers. - Survey on the Enterprises’ System of Accounts: This census-like survey is addressed to all enterprises with at least 100 workers. - Balance-sheets of stock companies: the stock companies must present their balance sheets to the Chambers of Commerce (administrative archive)

Q20108 Semi-final and final estimate of the value added - Estimation method of the layer per-capita (1) Specific estimation methods are used in the case of enterprises with 1 – 99 workers (being a sample survey), methods that are then adapted in the case of small areas: For enterprises with more than 99 workers (exhaustive survey), attention is paid to fill total and partial non-response.

Q20109 Provisional estimate of the value added – main sources Industrial production index: the index measures the monthly evolution of the volume of industrial output Industrial producer price index: the industrial producer price index measures the evolution of output prices for goods manufactured in Italy

Q Provisional estimate of the value added – estimation method of the layer per- capita value added (1) Unlike the semi-final and final year, the estimate is obtained for only two size classes (up to 99 employees and 100 employees or more). The reason for this choice is the lack of information at the level of size class. We begin with the calculation of the production index number: where Ipr = production index number Ipo = Output price index (this is a weighted average between the producer price index on the domestic market and changes in average export unit values), measuring changes in producer prices Ip = Industrial production index

Q Provisional estimate of the value added – estimation method of the layer per- capita value added (2) Once the estimate of the production index has been obtained, we move on to the estimate of value added, based on the hypothesis that the quantities of production and of costs have undergone the same changes in comparison with year t-1. Therefore, the estimate of theoretical value added at year t is given by: where = theoretical value added, based on the hypothesis that the quantities of production and of costs have undergone the same changes in comparison with year t-1 P = Production Ipi= Input price index (this is a weighted average between the producer price index on the domestic market and changes in average import unit values), measuring price changes in costs C= Intermediate consumption

Q Provisional estimate of the value added – estimation method of the layer per- capita value added (3) In order to take account of changes in the physical volume inherent in the production index, the estimate of actual value added at time t is given by: where = actual value added of enterprises with over 100 employees, taking account of both prices and quantities = is the theoretical production at time t, obtained by taking account only of prices = is the value of production of enterprises with over 100 employees at time t.

Q Provisional estimate of the value added – estimation method of the layer per- capita value added (4) At this point there is the problem of obtaining estimates referring to per capita arises. Firstly we calculate the index numbers for value added, production and full time equivalent units Therefore, the change in value added per capita is given by:

Q Provisional estimate of the value added – estimation method of the layer per- capita value added (5) With regard to the estimate of value added and production of small and medium enterprises we exploit the information available, which is constituted by the index numbers of large enterprises and by appropriate coefficients obtained from the time series.

Q Empirical analysis (1) In order to carry out an initial empirical analysis, the data from 2005 were considered in their three different versions: provisional, semi-final and final. The following table shows the changes in value added per capita for the main sectors of economic activity in the manufacturing sector: Table 1 – Changes in value added per capita in the manufacturing sector in the d ifferent versions – provisional, semi-final and final – year 2005 Semi-final / Provisional Final / Provisional Food - beverages - tobacco Chemicals Metalworking and mechanical engineering Textiles Other Manufacturing

Q Empirical analysis (2) As can be seen, the greatest differences in relation to the provisional figure are observed in the food sector (from 97.8 to 101.8), followed by textiles (from to 108.6). The sector which was least affected by the changes in all three editions is the metalworking and mechanical engineering sector, which changed from in the semi-final version in comparison with the provisional version, to in the final version, also in comparison with the provisional version. In total, the manufacturing sector recorded an initial downward revision (with a semi-final result of 99.4 against the provisional figure) and subsequently an upward revision in the final estimate (with a semi-final result of against the provisional figure).

Q Conclusions Sometimes semi-definitive revision isn’t good predictor of definitive version (as we have seen in the empirical analisys the manufacturing sector recorded an initial downward revision and subsequently an upward revision in the final estimate). To try new methods to estimate semi-definitive version

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