National Income Accounting

Definition

Health Economics

  • A set of definitions and methods for calculating the aggregate income and production of a jurisdiction (a country or a region), often used as a rough and ready indicator of a jurisdiction's economic welfare. There are basically three ways of measuring national economic activity: the output approach: the money value of the total production of goods and services during a year; the income approach: total income (wages/salaries, interest, rents, profits) derived from economic activity after allowance has been made for capital consumption; and the expenditure approach: the money value of consumption, investment, government expenditure and net exports. In theory, all three methods must yield the same results, because total expenditures on goods and services must equal the total income paid to the producers, which must also equal the total value of the output of goods and services.

    ,p>A difficult characteristic of the national accounts is that for most of the public sector, output is assumed to be equal to input, making public sector productivity growth (or its absence) impossible to measure and discouraging serious consideration of what the non-monetized outputs of this sector are. The practice can also be downright misleading if the accounts are interpreted as an indicator of aggregate welfare: an exogenous shock such as an epidemic will (ignoring any other effects it may have) increase the use of health care and generate an apparent rise in gross domestic product.

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