Box: Gross Product Originating: Definition and Relationship to Gross Domestic Product

Gross product, or gross product originating (GPO), by industry is the contribution of each private industry and government to the Nation's output, or gross domestic product (GDP). An industry's GPO, often referred to as its "value added," is equal 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 industries or imported).

For the national income and product accounts (NIPA's), GDP is measured as the sum of expenditure components. Gross domestic income (GDI) measures output as the sum of the costs incurred and the incomes earned in the production of GDP. In concept, GDP and GDI should be the same; in practice, they differ because their components are estimated using largely independent and less-than-perfect source data. BEA views GDP as the more reliable measure of output because the source data underlying the estimates of expenditures are considered to be more accurate./1/ The difference between GDP and GDI is called the "statistical discrepancy"; it is recorded in the NIPA's as an "income" component that reconciles GDI with GDP.

Current-dollar GPO by industry is measured as the sum of distributions by industry of the components of GDI attributable to labor and property located in the United States. Consequently, the sum of the current-dollar GPO estimates also differs from current-dollar GDP by the statistical discrepancy. In presenting the GPO estimates, the statistical discrepancy is included in the GPO of private industries because of BEA's view that most of the measurement problems with the components of GDI affect the GPO of private industries rather than the GPO of general government or government enterprises.

Real GDP in the NIPA's is also measured as the sum of the expenditure components. Real GPO estimates for most industries are derived using separate estimates of gross output and intermediate inputs./2/ The sum of the real GPO estimates differs from real GDP by the real statistical discrepancy, which is shown as part of private-industry GPO, and by the category entitled "not allocated by industry," which is the difference between real GDP and the sum of real GPO for the detailed industries and of the statistical discrepancy. The value of the category "not allocated by industry" reflects the lack of additivity of detailed real GPO estimates that results from the formula used to calculate real output and from differences in the source data (both current dollars and prices) used to estimate industry GPO and the expenditures measure of real GDP. As with the current-dollar measures, BEA views the source data used to estimate the components of real GDP to be more reliable. In addition, the amount of detailed expenditures data available to calculate real GDP is greater than that for the gross output and intermediate inputs available to calculate real GPO. For some industries, no source data are available to measure gross output, and the resulting real GPO estimates are prepared using less reliable methodologies.

Footnotes:

1. For additional information on the accuracy of the two measures, see the box "The Statistical Discrepancy" in Robert P. Parker and Eugene P. Seskin, "Annual Revision of the National Income and Product Accounts," SURVEY OF CURRENT BUSINESS 77 (August 1997): 19.

2. For information about the computation of the real GPO estimates, see the box "Computation of the Chain-Type Quantity Indexes for Double-Deflated Industries" in Robert E. Yuskavage, "Improved Estimates of Gross Product by Industry, 1959–94," SURVEY 76 (August 1996): 142.