Comprehensive revision of gross state product by industry, 1977-94 - U.S. Bureau of Economic Analysis - includes related article on data availability, GSP estimate release schedule and revision acknowledgements

Survey of Current Business, June, 1997 by Howard L. Friedenberg, Richard M. Beemiller

In this article, the Bureau of Economic Analysis (BEA) presents new estimates of gross state product (GSP) for 1993 and 1994 and revised estimates for 1977-92.(1) The new and revised GSP estimates are consistent with the improved estimates of gross product originating (GPO) by industry for the Nation that were published in the August 1996 SURVEY OF CURRENT BUSINESS. The estimates incorporate the results of the most recent comprehensive revisions of the national income and product accounts (NIPA'S) and of the State personal income accounts.(2)

The following major improvements have been incorporated into these new and revised GSP estimates:

* Chain-type measures of real GSP, which reduce the substitution bias that is inherent in the previously used fixed-weighted measures;

* A new treatment of government investment, which provides a more complete picture of investment through the consistent treatment of investment in both the public and private sectors;

* Additional State source data on sales, on sales taxes, and on gross receipts taxes, which result in better allocations of national commodity taxes by industry; and

* State data on receipts and payrolls for industries newly covered in the 199z economic censuses.

These improvements are another step in BEA'S continuing effort to update and better integrate the GSP estimates by industry with the national estimates of GPO by industry and the national input-output accounts.(3)

GSP for a State is derived as the sum of the gross state product originating in all industries in the State. In concept, an industry's GSP, or its "value added," is equivalent to its gross output (sales or receipts and other operating income, commodity taxes, and inventory change) minus its intermediate inputs (consumption of goods and services purchased from other U.S. industries or imported). Thus, GSP is the State counterpart of the Nation's gross domestic product (GDP). In practice, GSP and GPO estimates are measured as the sum of the distributions by industry of the components of gross domestic income--that is, the sum of the costs incurred (such as compensation of employees, net interest, and indirect business taxes) and the profits earned in production.(4)

BEA prepares GSP estimates for 63 industries (see appendix A). For each industry, GSP is presented in three components: Compensation of employees, indirect business tax and nontax liability, and "other GSP."(5) The relationship between these components and the components of GPO and GDP is shown in appendix B.

BEA prepares estimates of GSP in current dollars (see table 9, which follows the text) and of real GSP (see table 10). As discussed in the section "Methodology," the methodology used to estimate current-dollar GSP for each industry depends on the source data that are available. State estimates of GSP for all industries and components are "controlled" to national totals of GPO for all industries and components.(6) The estimates of real GSP are derived by applying national chain-type implicit price deflators by detailed industry to the current-dollar GSP estimates by detailed industry and then using the same chain-type Fisher index used in the national accounts to calculate the estimates of total real GSP and real GSP by major industry.

[TABULAR DATA 9 & 10 NOT REPRODUCIBLE IN ASCII]

Real GSP is an inflation-adjusted measure of each State's output that is based on national prices for the goods and services produced within that State. It is not a measure of the cost of goods and services consumed in each State and may include a substantial volume of output shipped to other States or countries. To the extent that a State's output is produced and sold in national markets at relatively uniform prices (or sold locally at national prices), GSP does a reasonable job of measuring real output by capturing differences across States that reflect relative differences in the mix of goods and services that the States produce. However, real GSP does not capture geographic differences in the prices of goods and services produced for local markets.

The first part of this article discusses the relative performance of various States in terms of growth rates, shares of the Nation, and industry shares of State totals. The second part discusses the revisions to the GSP estimates, and the third part describes the methodology used to prepare the GSP estimates. A technical note at the end of the article describes the calculation and the properties of the new chain-type measures of real GSP.

Growth Rates and Shares

Comparisons of GSP growth rates and shares of GSP across industries or States provide indications of the relative performance of industries or States. For example, a comparison of the growth rate of real GSP for an industry with the growth rate of total real GSP indicates whether that industry is raising (or is lowering) the State's growth rate. A comparison of the share of total GSP in current dollars that is accounted for by the GSP of an industry over time indicates whether that industry's claim on the State's resources is increasing (or decreasing).