Measurement of Real Income in the System of National Accounts: An Application to North American Economies

Abstract:     
This paper makes use of both output and income statistics derived from the System of National Accounts to examine performance in the three North American countries. In doing so, the paper follows recommendations contained in the System of National Accounts 1993 (SNA 1993) for calculating aggregate real income statistics such as gross national income (GNI) and gross national disposable income (GNDI) rather than aggregate real gross domestic product (GDP), in order to demonstrate the utility of alternate measures for analyzing aggregate economic performance and the standard of living. To move from estimates of GDP to estimates of GNI and GNDI, adjustments are made for changes in relative prices, referred to as a “trading gain” (the combined effect of changes to the terms of trade and changes in the ratio of traded goods prices to non-traded goods prices), and for current account entries other than the trade balance.

The paper compares real output and income measures for Mexico, the United States, and Canada. Differences between the GDP and GNDI estimates illustrate the extent to which non-production factors, such as relative price changes, can influence the economic performance of a nation, either as compared to that of other nations or in terms of a nation’s ability to purchase the goods and services its citizens consume. They also illustrate the benefit of using more than one measure when comparing economic performance across countries.

Number of Pages in PDF File: 22

Keywords: aggregate income, terms of trade, real income, balance of payments

JEL Classification: E01, F4, F13

working papers series