Gross Domestic Product by State 

Estimation Methodology 

U.S. DEPARTMENT OF COMMERCE 

Carlos M. Gutierrez, Secretary 

BUREAU OF ECONOMIC ANALYSIS 

J. Steven Landefeld, Director 

Rosemary D. Marcuss, Deputy Director 

2006 www.bea.gov 
Acknowledgments

U.S. Department of Commerce 

Carlos M. Gutierrez, Secretary 

Bureau of Economic Analysis 

J. Steven Landefeld, Director


Rosemary D. Marcuss, Deputy Director


John W. Ruser, Associate Director for Regional Economic Accounts, provided overall guidance for the 

preparation of this document. 

John R. Kort, Chief of the Regional Economic Analysis Division, directed the preparation of this 

document. 

George K. Downey, Chief of the Regional Product Branch, and Gerard P. Aman (retired) prepared this 

document. 

Sharon D. Panek, Chief of the Gross Domestic Product by State Services Section, and Clifford H. 

Woodruff III, Chief of the Gross Domestic Product by State Goods Section, assisted in the preparation 

of this document with contributions from Frank T. Baumgardner, John E. Broda, Eric C. Erickson, 

Timothy P. McInerney, Joseph A. Polka, Daniel A. Reed, and Caitlin E. Wenum. 

i
Executive Summary


THIS volume presents the conceptual framework, the data sources, and the statistical methodologies used by 

the Regional Economic Analysis Division of the Bureau of Economic Analysis (BEA) to estimate gross domestic product (GDP) by industry for all U.S. states for 1963–2005. GDP by state is the state equivalent of GDP 

for the nation. 

In theory, the measurement of GDP for the nation is equal to gross domestic income (GDI). However, because 

GDP and GDI are measured using different source data, they usually are not equal. The difference between GDP 

and GDI is displayed in the National Income and Product Accounts (NIPAs) as the statistical discrepancy. GDP is 

measured as the expenditures of households on goods and services plus business investment, government expenditures, and net exports. GDI is measured as the factor incomes earned (labor and capital income) and other 

costs incurred in production. GDP by state is measured as the factor incomes incurred in production, as is GDI. 

Although GDP by state is measured like GDI, the factor incomes are reconciled with GDP as the final step in the 

estimation process. 

Measuring GDP by state 

Gross domestic product by state cannot be measured by adding the number of goods and services produced by 

the states’ economies because GDP by state consists of a variety of goods and services. Not only do the goods vary 

in size and quality, but it is difficult, if not impossible, to generate a unit measure of diverse services. Even goods 

that seem similar, such as automobiles, are not because they have different options and are priced differently. 

Therefore, the only way to meaningfully measure GDP by state is in dollars. The GDP by state dollar value is necessarily measured by either the amount of expenditures on it, or by the amount of incomes earned by the factors 

of production in producing it. 

Theoretically, it should be an easy task determining the value added by the industries in the states. One 

method would be to survey all the companies in the states and compile a list of the value of the goods and services they produced and what it cost to produce them. Or, one could go to a central state statistical agency and 

ask them for the value added for each and every company in the state and then add them all up. Unfortunately, 

neither of these is an option, because it is too expensive to conduct an annual economic census by state, and no 

state statistical agency exists that compiles such data. Therefore, value added by industry must be derived from 

information that already exists. 

Estimating GDP by state involves collecting and assembling data from Federal and state and local government 

agencies and bureaus, other BEA accounts, and private companies. These data must be incorporated in the 

proper order according to a national income accounting blueprint that assures consistency with BEA’s GDP estimates. 

GDP by state, like GDI for the nation, is measured as the factor incomes earned and the costs of production. 

LABOR INCOME 

Includes the wages, salaries, and other benefits 

earned by workers 

BUSINESS TAXES 

Includes Federal excise, sales, property, and other 

taxes that can be included as a business expense. 

CAPITAL INCOME 

Includes income earned by individual or joint business entrepreneurs as well as corporations. Also includes depreciation and other income earned by 

capital. 

Gross 

Domestic 

Product 

by State 

ii
GDP by State Estimation Methodology 

The incomes earned by the factors of production—typically labor and capital—are shown in the top and bottom 

boxes of the diagram on page ii as labor income and capital income, respectively. The middle box—business 

taxes—represents part of the costs of production. GDP by state equals the sum of these components and each 

component is estimated by industry. 

No matter how a GDP by state component is estimated, it is always adjusted to be consistent with BEA’s definition of value added. This means that much of the GDP by state regional source data acquired from sources outside of BEA are adjusted to BEA’s product and income definitions and concepts. 

Overview of the GDP by state methodology 

The GDP by state estimation process can be divided into eight consecutive steps as follows: 

1. Estimate labor income using data from BEA’s state personal income (SPI) accounts. 

2. Estimate non-corporate capital income also using data from BEA’s SPI accounts. 

3. Estimate business taxes less subsidies paid to business by government using data from the Census Bureau, 

other federal agencies, and state government agencies. 

4. Estimate total GDP by state for goods-producing industries (crop and animal production, mining, construction, and manufacturing) based on value-added data from the Department of Agriculture and the 

Census Bureau. 

5. Estimate corporate capital income for the services-producing industries (forestry, fishing, and related activities; utilities; wholesale and retail trade; transportation and warehousing, excluding postal service; information; finance and insurance; real estate, rental, and leasing; professional and technical services; 

management of companies and enterprises; administrative and waste services; educational services; health 

care and social assistance; arts, entertainment, and recreation; accommodation and food services; and other 

services) using financial data reported by company for regulated industries and Census Bureau gross receipts and payroll data for non-regulated industries. For government enterprises, capital income is based 

on revenues and expenditures data from the Census Bureau. 

6. Compute the remaining component, GDP by state or corporate capital income. For the goods-producing 

industries in step 4, the corporate capital income component of GDP by state is computed as the difference 

between GDP by state and the sum of labor income, noncorporate capital income, and business taxes less 

subsidies. For the services-producing industries in step 5, GDP by state is computed as the sum of labor income, business taxes less subsidies, and capital income. 

7. Scale GDP by state and its components to the national estimates of GDP by industry produced by BEA’s Annual Industry Accounts. 

8. Finally, compute real GDP by state by applying national chain-weighted price deflators to current-dollar 

GDP by state estimates. 

Much of the source data used to estimate GDP by state come from the economic censuses compiled by the 

Census Bureau every five years. The first year GDP by state (formally known as gross state product, or GSP) is 

available is 1963, a census year. Census years are known as benchmark years in the estimation process because of 

the breadth of the Census Bureau source data used for estimating GDP by state. For GDP by state, the benchmark years are 1963, 1967, 1972, 1977, 1982, 1987, 1992, 1997 and 2002. All other years are nonbenchmark years 

for generating the estimates. Non-benchmark year’s estimates involve interpolation and extrapolation techniques 

using indicator series that mirror the movement in the GDP by state component being estimated. For a more 

complete discussion of the GDP by state estimation methodologies, refer to the full-text document that accompanies this summary. 

iii
Table of Contents 

I. Overview.......................................................................................................................................................................................................................................................................................... 1


II.� Compensation of Employees................................................................................................................................................................................................................................. 3


Wage and salary accruals ........................................................................................................................................................................................................................................ 3


Employer contributions for employee pension and insurance funds........................................................................................................... 3


Employer contributions for government social insurance.......................................................................................................................................... 3


III. GDP by State for Goods-Producing Industries ............................................................................................................................................................................. 4


IV.�Taxes on Production and Imports and Subsidies........................................................................................................................................................................ 5


TOPI except property taxes................................................................................................................................................................................................................................. 5


Property taxes........................................................................................................................................................................................................................................................................ 5


Subsidies ...................................................................................................................................................................................................................................................................................... 5


V.� Gross Operating Surplus............................................................................................................................................................................................................................................. 7


Proprietors’ income....................................................................................................................................................................................................................................................... 7


Corporate capital charges...................................................................................................................................................................................................................................... 8


Nontax payments to government............................................................................................................................................................................................................ 8


Services-producing industries ......................................................................................................................................................................................................................... 8


Utilities ...................................................................................................................................................................................................................................................................................... 9


Air transportation ....................................................................................................................................................................................................................................................... 9


Rail transportation..................................................................................................................................................................................................................................................... 9


Insurance carriers and related activities.......................................................................................................................................................................................... 10


Credit intermediation............................................................................................................................................................................................................................................. 10


Net interest ....................................................................................................................................................................................................................................................................... 11


Profits before taxes.................................................................................................................................................................................................................................................. 11


CCA and business transfer payments (BTP) for depository and nondepository institutions............................... 11


Total capital charges for depository and nondepository institutions.................................................................................................... 12


Real estate............................................................................................................................................................................................................................................................................... 12


Housing services........................................................................................................................................................................................................................................................ 12


Other real estate ......................................................................................................................................................................................................................................................... 12


Federal, state, and local government....................................................................................................................................................................................................... 13


VI.�Real GDP by State................................................................................................................................................................................................................................................................ 15


Chain-weighted quantity indexes................................................................................................................................................................................................................ 15


Contributions to real growth ............................................................................................................................................................................................................................ 16


VII. Future Developments...................................................................................................................................................................................................................................................... 17


Extending the GDP by State-NAICS time series ...................................................................................................................................................................... 17


Improving the timeliness of the GDP by state estimates............................................................................................................................................... 17


GDP by metropolitan area estimates ...................................................................................................................................................................................................... 17


iv
GDP by State Estimation Methodology 

VIII. Technical Notes...................................................................................................................................................................................................................................................................... 18


Appendix D. Major Sources of State Data for the Estimates of Taxes on Production and Imports by


Appendix E. Major Sources of State Data for the Estimates of Gross Domestic Product by State and 


Note 1: Interpolation and extrapolation procedures........................................................................................................................................................ 18


Note 2: Allocation and dual allocation procedures............................................................................................................................................................. 18


Note 3: Estimates of national totals for TOPI............................................................................................................................................................................ 19


Federal excise taxes by industry.............................................................................................................................................................................................................. 19


State and local taxes by industry........................................................................................................................................................................................................... 19


Benchmark vs. nonbenchmark estimates.................................................................................................................................................................................. 21


Note 4: Estimates of national totals for nontax payments ......................................................................................................................................... 21


Rents and royalties .................................................................................................................................................................................................................................................. 21


Business transfer payments to government............................................................................................................................................................................ 21


Note 5: Adjustments to financial items of utilities companies............................................................................................................................. 21


Appendix A. The Relation of GDP by State and U.S. GDP, 2004...................................................................................................................... 22


Appendix B. NAICS Industries for Which GDP by State Estimates are Available from 1997 to 2005.............. 23


Appendix C. SIC Industries for Which GDP by State Estimates are Available from 1963 to 1997........................ 24


Industry....................................................................................................................................................................................................................................................................................... 25


Industry....................................................................................................................................................................................................................................................................................... 27


Appendix F. Major Sources of State Data for the Estimates of Nontax Payments to Government........................ 29


Frequently Asked Questions............................................................................................................................................................................................................................. 30


Suggested Reading......................................................................................................................................................................................................................................................... 34


Glossary....................................................................................................................................................................................................................................................................................... 36


v

1 

I. Overview


I N May 1985, the Bureau of Economic Analysis 

(BEA) published experimental estimates of gross 

domestic product by state (GDP by state) for years 

1963, 1967, 1972, and 1977, culminating a research effort that began in 1982. The experimental estimates 

were built upon BEA’s state personal income (SPI) accounts and its GDP by industry accounts.

1

 Since then, 

BEA has continued improving its GDP by state estimates by incorporating additional source data, improving the underlying estimation methodology, and 

more closely integrating the GDP by state estimates 

with the national estimates of the annual industry accounts and the national input-output (I-O) accounts. 

Further, the release of prototype advance estimates in 

December 2004 significantly improved the timeliness 

of the GDP by state estimates. 

The annual GDP by state series consists of estimates 

for 1963–1997 for Standard Industrial Classification 

(SIC-based) industries and 1997–2005 for North 

American Industry Classification (NAICS-based) industries (as of June 2006). The GDP by state data are 

1. For a discussion of the methodology used to compute state personal 

income see “State Personal Income: 2004 Methodology.” Online methodology publication (October 2005): <http://www.bea.gov/bea/regional/articles/spi2004/Complete_Methodology.pdf>. 

revised and updated twice annually, with benchmark 

revisions occurring approximately every five years, 

usually in conjunction with major revisions in BEA’s 

estimates of GDP and GDP by Industry. 

The GDP by state estimates are the state counterpart 

of gross domestic product and as such, provide a comprehensive measure of a state’s production. The following table delineates the differences between GDP by 

state and SPI. 

The GDP by state estimates are used widely in both 

the public and private sectors. For example, the U. S. 

Department of the Treasury uses GDP by state in its 

calculation of a state’s Total Taxable Resources and in 

formulas used to distribute federal grants among the 

states for Community Mental Health Services and Substance Abuse Prevention and Treatment block grants. 

GDP by state estimates are also used by consulting 

firms and universities for use in econometric forecasting models, by state revenue departments for budget 

planning, and by state and local economic development offices for attracting new businesses to their 

states. 

The estimate of GDP by state for each state is derived as the sum of the gross domestic product originating in all industries in the state. In concept, an 

The Relation of Gross Domestic Product by State and Personal Income, 2003 

[Billions of dollars] 

Component GDP by state Personal income 

Compensation of employees............................................................................................. 6,268.7 6,271.5 

Wages and salaries ........................................................................................................... 5,092.4 5,095.2 (1

) 

Supplements to wages and salaries.................................................................................. 1,176.3 1,176.3 

Employer contributions for employee pension and insurance funds .............................. 800.6 800.6 

Employer contributions for government social insurance ............................................... 375.7 375.7 

Taxes on production and imports (TOPI).......................................................................... 798.1 ............................................................ 

Less: Subsidies .................................................................................................................. 46.7 ............................................................ 

Gross operating surplus 2 .................................................................................................. 3,903.8 ............................................................ 

Proprietors’ income 3 ......................................................................................................... ............................................................ 839.1 

Equals: Earnings by place of work ................................................................................... ............................................................ 7,110.6 

Less: Contributions for government social insurance ................................................... ....................................................... (4

) 771.5 (

5

) 

Personal contributions for government social insurance ................................................... ............................................................ 395.8 

Employer contributions for government social insurance .................................................. ............................................................ 375.7 

Plus: Adjustment for residence 6 ..................................................................................... ............................................................ –1.2 

Plus: Dividends, interest, and rent 7 ................................................................................. ........................................................(8

) 1,475.4 

Plus: Personal current transfer receipts .......................................................................... ............................................................ 1,335.3 

Total...................................................................................................................................... 10,923.8 9,148.7 

1. Includes the wage and salary disbursements of U.S. residents employed by international organi- 6. The adjustment for residence is the net inflow of the earnings of interarea commuters. For the zations and foreign embassies and consulates in the United States. United States, it consists of adjustments for border workers: wage and salary disbursements to U.S. 

2. Includes consumption of fixed capital (CFC), proprietors’ income with the IVA and the CCA, rental residents commuting to Canada less wages and salary disbursements to Canadian and Mexican resiincome of persons with the CCAdj, corporate profits with the IVA and the CCAdj, and other mainly dents commuting into the United States. 

capital-related charges. 7. Rental income of persons includes the CCAdj. 

3. Proprietors’ income includes the IVA and the CCAdj. 8. Rental income of persons with the CCAdj is included in gross operating surplus. 

4. Contributions for government social insurance are included in gross domestic product by state so IVA Inventory valuation adjustment they are not shown here. CCA Capital consumption allowance 

5. Contributions for government social insurance are included in earnings by type and industry, but CCAdj Capital consumption adjustment 

they are excluded from personal income. 
2 GDP by State Estimation Methodology 

industry’s GDP by state, or its value added, is equal to 

its gross output (sales or receipts and other operating 

income, commodity taxes, and inventory change) less 

the value of its intermediate inputs (consumption of 

goods and services purchased from other U. S. industries or imported). The sum-of-states NAICS-based 

GDP by state differs from GDP for the nation for two 

reasons: 

● GDP by state excludes, and the annual industry 

accounts include, compensation of federal civilian 

and military personnel stationed abroad and government consumption of fixed capital for military 

structures located abroad and for military equipment, except domestically located office equipment. 

● GDP by state, GDP, and the annual industry 

accounts have different revision schedules.2 

For an accounting of the differences between GDP 

by state for the nation and the annual industry accounts for a representative year, see Appendix A.3 

GDP by state estimates are prepared for 81 NAICS 

industries (Appendix B). For each industry, GDP by 

state is presented in four components: 

● Compensation of employees (COMP), 

● Taxes on production and imports (TOPI), 

● Subsidies (SUB), and 

● Gross operating surplus (GOS). 4 

The state estimates of GDP by state and its components for all industries are consistent with national totals of the annual industry accounts and its 

components for all industries. 

In general, there are two procedures for estimating 

GDP by state and its components, one uses state-level 

Census Bureau value-added data for the goods-producing industries to estimate GDP by state for these 

industries, and the other utilizes Census Bureau receipts and payroll data, or company financial data to 

estimate GOS for the services-producing industries. 

2. For SIC-based GDP by state estimates, there is an additional difference 

between sum-of-states GDP by state and national GDP: SIC-based GDP by 

state is consistent with gross domestic income (GDI), which differs from 

GDP by the statistical discrepancy. See Appendix C for a list of industries 

published for SIC-based GDP by state estimates. 

3. See also the box “Gross Domestic Product by Industry: Definition and 

Relationship to Gross Domestic Product and Other Measures of Output,” 

in Robert J. McCahill and Brian C. Moyer, “Gross Domestic Product by 

Industry for 1999-2001,” Survey of Current Business 82 (November 2002): 

23. 

4. Gross operating surplus is the sum of corporate profits, proprietors’ 

income, rental income of persons, net interest, capital consumption allowances, business transfer payments, nontax payments, and the current surplus/deficit of government enterprises. Proprietors’ income includes some 

portion of labor compensation that should be included in the employee 

compensation component of GDP by state, but it is not possible to separate 

the labor share of proprietors’ income from the capital share. 

For goods-producing industries, except farming, 

GDP by state is computed as Census Bureau value 

added, adjusted to BEA’s concept of value added. For 

farming, data on farm expenditures and receipts from 

the Department of Agriculture are used to compute 

value added for the industry. The GOS income component for goods-producing industries is computed as a 

residual: 

GOS = GDPs – (COMP +TOPI – SUB). 

For services-producing industries, Census Bureau 

receipts and payroll data or company financial data are 

used to estimate the GOS income component. GDP by 

state is the sum of the estimated income components: 

GDPs = COMP + TOPI – SUB + GOS. 

The other income components for calculating GDP 

by state (compensation of employees, taxes on production and imports, and subsidies) are estimated separately for each industry. 

The GDP by state estimates are prepared in current 

and chained (real) dollars. Real GDP by state is an inflation-adjusted measure that is based on national 

prices for the goods and services produced within each 

state. 

The purpose of this document is to provide readers 

with a more detailed description of the sources and 

methods used by BEA to prepare its estimates of GDP 

by state than is publicly available elsewhere. Sections 

II–V describe the data and methods used to estimate 

compensation of employees, taxes on production and 

imports, subsidies, and gross operating surplus. Section VI shows the calculation of chained-dollar GDP 

by state. Section VII looks ahead to future improvements planned for the GDP by state estimates. Section 

VIII presents supplemental technical details about how 

the GDP by state estimates are prepared. Finally, a series of tabular appendices gives information about the 

industries for which GDP by state estimates are prepared and the source data used to prepare the estimates. 

A document of this length cannot provide a complete enumeration of all the steps involved in estimating GDP by state. While some technical details may be 

omitted or summarized, the methodological descriptions presented cover all the important steps included 

in the GDP by state estimation process. The discussion 

is essentially nonmathematical, to a reasonable extent, 

with algebra and equations introduced only where 

necessary or segregated in technical notes at the end of 

this document. 
3

II. Compensation of Employees


C OMPENSATION of employees is the largest component of GDP by state, normally accounting for 

about three-fifths of U. S. GDP by state. Compensation 

of employees is estimated as the sum of three components: 

●Wage and salary accruals, 

● Employer contributions for employee pension and 

insurance funds, and 

● Employer contributions for government social 

insurance. 

Wage and salary accruals 

The GDP by state estimate of wage and salary accruals 

is derived directly from the wage and salary disbursements estimated as part of BEA’s SPI accounts.

5 The 

SPI wage and salary disbursements by industry are adjusted to account for wages that have accrued in one 

calendar year but were disbursed in the following year. 

This adjustment to put wage and salary disbursements 

onto an accrual basis is called the “wage accruals less 

disbursements adjustment,” or the WALD adjustment. 

The WALD adjustment is calculated for each industry 

and state on the basis of quarterly tabulations of wages 

and salaries covered by state unemployment insurance 

programs from the Bureau of Labor Statistics (BLS). 

BEA assumes that all bonus payments paid in the first 

quarter of each year were accrued in the previous calendar year. Wage and salary accruals are equal to the 

SPI wage and salary disbursements by industry and 

state plus the WALD adjustment. 

5. Wage and salary accruals and wage and salary disbursements both 

include the monetary remuneration of employees and the compensation of 

corporate officers. Both wage series also include commissions, tips and 

bonuses, voluntary employee contributions to certain deferred compensation plans, such as 401(k) plans, and receipts in kind that represent income. 

Accruals and disbursements differ because wage and salary disbursements 

include retroactive wage payments (bonus payments) recorded in the year 

they are paid, which may differ from the year in which they were earned. 

GDP by state is a measure of production occurring within a calendar year, 

so wage accruals are the proper measure to use in the GDP by state 

accounts. 

GDP by state wages and salaries, and the SPI accounts on which they are based, exclude the wages and 

salaries of federal military and civilian personnel stationed abroad because their contribution to gross 

product is not geographically located within a state. 

Employer contributions for employee pension and 

insurance funds 6 

The estimate of employer contributions for employee 

pension and insurance funds is used directly in the 

GDP by state accounts; no adjustments are required. 

The estimate excludes the employer contributions for 

Federal civilian and military personnel stationed 

abroad. 

Employer contributions for government social 

insurance 7 

The estimate of employer contributions for government social insurance is used directly in the GDP by 

state accounts; no adjustments are required. The estimate excludes the contributions for Federal civilian 

and military personnel stationed abroad. 

Compensation of employees for all industries is the 

sum of wage and salary accruals, employer contributions for employee pension and insurance funds, and 

employer contributions for government social insurance. 

6. Employer contributions for employee pension and insurance funds 

consists of employer payments to private pension and profit-sharing plans, 

private group health and life insurance plans, privately administered workers’ compensation plans, supplemental unemployment benefit plans, corporate directors’ fees, and several minor categories of employee 

compensation, including judicial fees to jurors and witnesses, compensation of prison inmates, and marriage fees to justices of the peace. There are 

no employer contributions for employee pension and insurance funds in 

federal military. 

7. Employer contributions for social insurance consists of employer payments under the following federal government and state and local government programs: Old-age, survivors, and disabilities insurance (social 

security); hospital insurance; unemployment insurance; railroad retirement; pension benefit guaranty; veterans life insurance; publicly administered workers’ compensation; military medical insurance; and temporary 

disability insurance. 
4

III. GDP by State for Goods-Producing Industries


T HE private goods-producing industries are agriculture, forestry, and fishing; mining; construction; and manufacturing. For these industries, BEA 

estimates total GDP by state, compensation of employees, proprietors’ income with inventory valuation adjustment (IVA) and capital consumption allowance 

(CCA), subsidies, and TOPI.

8, 9 The corporate capital 

charge component of GOS is then computed as a residual. 

For farms, the GDP by state estimates for all years 

are based on the difference between farm receipts and 

farm expenses from the U. S. Department of Agriculture (USDA).10 For mining, construction, and manufacturing, the GDP by state estimates are based on 

value added from the quinquennial economic censuses, although the census data must be adjusted to 

conform to BEA’s definition of value added. 

Manufacturing, construction, and mining industries value-added data from the Census Bureau include 

the value of purchased services, which BEA treats as an 

intermediate cost of production and not as a part of 

value added. The Census Bureau data are adjusted to 

remove the cost of purchased services.

11 The national 

ratio of purchased services to value added by industry, derived from BEA’s national annual input-output (I-O) tables, is used to estimate and remove the 

value of purchased services in the Census Bureau’s 

state manufacturing valued added measure, to yield 

an estimate of value added by state, industry, and 

year. 

After removing the cost of purchased services from 

the Census Bureau value-added data, an additional adjustment is made to account for differences in industry 

coverage and classification between the Census Bureau 

and BEA. The adjusted Census Bureau value-added 

8. The forestry, fishing, and related activities industry, which is part of 

agriculture, forestry, fishing, and hunting, is estimated like a services-producing industry described later in this document. 

9. The inventory valuation adjustment (IVA) is an adjustment to put 

inventories on BEA’s concept (replacement cost) from the way inventories 

are reported for income tax purposes (business cost). The capital consumption allowance (CCA) consists of depreciation charges and accidental damage to fixed capital. 

10. Farm income is the sum of cash receipts, other farm income, and 

inventory change. Farm expenses include the purchase of the following 

goods and services: feed, livestock, seed, fertilizer and lime, petroleum 

products, veterinary services, pesticide, rental expense of non-operator 

landlords, equipment operation and repair, electricity, and miscellaneous 

expenses. 

11. The major commodity groups included in purchased services are 

communications, finance, insurance, real estate, and services. Only that 

portion of wholesale trade attributable to sales branches and offices, i.e., 

non-margin output, is treated as purchased services. 

data are multiplied by the ratio of BEA wages and salaries to Census Bureau payrolls by state and industry. 

This is done on the assumption that the ratio would be 

1.0 if there were no differences in coverage and classification of establishments between the two data series. 

For the construction industry, additional definitional adjustments are made to the Census Bureau 

value-added data: 

1. BEA removes rental payments for machinery and 

equipment, because these payments are treated as 

an intermediate expense by BEA. 

2. After the previous adjustment, an adjustment is 

made to account for the value added generated by 

construction firms without payrolls, based upon the 

ratio of “value of construction work for all firms” 

divided by “value of construction work for firms 

with payrolls”, as measured by the Census Bureau. 

3. Finally, the adjusted value added is multiplied by 

the ratio of “value of construction work by location” 

to “value of construction work by establishment” to 

reassign the adjusted value added from the state 

where the construction establishment is located to 

the state where the construction is performed. 

After adjusting Census Bureau value-added data, 

the sum-of-state adjusted value added for the mining, 

construction, and manufacturing industries are reconciled with the national industry accounts value added, 

excluding federal excise taxes (FETs) for the nation, 

yielding estimates of GDP by state, excluding FETs for 

the state. GDP by state is then computed by adding estimates of FETs by industry and state. Corporate capital charges (CC) by industry and state are then 

estimated by subtracting employee compensation, 

TOPI, and proprietors’ income from GDP by state. 

The GDP by state estimates for goods-producing industries use different source data and estimation techniques for years not covered by economic censuses. For 

the detailed manufacturing industries, value-added 

data from the Annual Survey of Manufactures are used 

to produce the GDP by state estimates using an estimation methodology similar to that used in the benchmark years. For the detailed industries within the 

mining sector, value-of-production data for each mining industry are used to extrapolate or interpolate 

GDP by state values. For construction, GDP by state 

earnings estimates are used as the industry extrapolation or interpolation series for construction GDP by 

state. 
5 

IV. Taxes on Production and Imports and Subsidies


T AXES on production and imports (TOPI) consist 

of tax liabilities, including taxes on sales, property, and production that can be charged to business 

expense in the calculation of profit-type income. TOPI 

does not include employer contributions for government social insurance, which are included in employee 

compensation. Moreover, TOPI does not include corporate incomes taxes, because these taxes cannot be 

calculated until profits are known, so these taxes cannot be considered a cost of production. 

TOPI except property taxes 

TOPI is estimated as the sum of 83 federal excise and 

state and local taxes, of which the two largest—general 

sales and gross receipts taxes and property taxes—account for about 60 percent of TOPI nationally (Appendix D). The national measure for each tax, except 

general sales and gross receipts taxes, is distributed to 

states, by industry, using Census Bureau tax receipts or 

other appropriate state indicator series. 

For general sales and gross receipts taxes, information is often available from state tax collection reports 

about the distribution of the taxes by industry and 

state. However, the industry detail reported by the 

states varies, so data from the state tax reports are aggregated or disaggregated as required, on the basis of 

the industry distribution of employee compensation, 

to conform to the industries for which the GDP by 

state estimates are prepared. When the total sales and 

gross receipts taxes from individual state tax collection 

reports differ from the state totals reported to the Census Bureau, the Census Bureau value is assumed to be 

the more reliable level and the industry estimates are 

made consistent with the published census values. 

The GDP measures of the remaining TOPI components are distributed to the states using one of the following two methods depending on whether the tax is 

paid by just one or by several industries: 

●When the tax is paid by a single industry, the Census 

Bureau measure of the tax receipts by state, if available, is used as the indicator series to distribute the 

GDP by Industry tax measure to the states. If a Census measure is not available, a related state indicator 

is used to allocate the annual industry accounts’ tax 

measure to the states (Appendix D). 

●When the tax is paid by two or more industries, a 

dual allocation procedure is used. First, the industry 

distribution of BEA’s compensation of employees, 

by state, is employed to distribute the Census 

Bureau’s measure of the state’s total collection of the 

tax to the industries in each state. Second, the 

resulting industry distribution by state is used to 

distribute the national GDP by Industry measure of 

the tax to the states.

12 

Property taxes 

Property tax estimates begin with the Census Bureau 

tax receipts data; although these data need to be adjusted to BEA’s concept. First, the Census Bureau “total” property taxes are adjusted, by state, to remove 

BEA’s estimates of personal property taxes, which are 

part of SPI but not GDP by state. Second, property 

taxes for farms and nonoperator landlords of farms, 

available from the Department of Agriculture, are subtracted, leaving estimates of property taxes paid by 

nonfarm businesses and by residential housing, by 

state. Third, this total is multiplied by the state’s ratio 

of residential assessments divided by total nonfarm assessments to estimate residential housing property 

taxes, which are also subtracted from the Census Bureau measure of property taxes.13 Property taxes on 

farms are assigned to the farming industry, except for 

property taxes on the farms of nonoperator landlords 

and on residential housing, which are assigned to the 

real estate industry. The remaining property taxes (on 

nonfarm and nonresidential businesses) are allocated 

to national industry totals and to state property tax totals according to the state and industry distributions of 

BEA’s estimate of compensation of employees. 

Subsidies 

Subsidies, which are government transfers to business, 

increase profits before taxes while not reflecting any 

production. Accounting for the value of production, 

therefore, requires that the value of subsidies be removed from gross product. Subsidies occur in a few industries, and for each industry, a national subsidies 

12. For additional information on dual allocation, see “Note 2: Allocation 

and dual allocation procedures” in the “Technical Notes” section. 

13. The Census Bureau discontinued reporting assessed values by property use class following the 1987 Census of Governments. 
6 GDP by State Estimation Methodology 

total is distributed to the states by means of an indicator series: 

● Crop and animal production (“Farms”) subsidies are 

allocated on the basis of each state’s share of total 

GDP by state for the industry.

14 

● Utilities subsidies are allocated to California only for 

2001–2003. The subsidies are due to California 

companies being overcharged for electricity consumption. 

● Air transportation subsidies are estimated on the 

basis of company financial data. Because an airline 

may operate in one state or in many states, and 

because air transportation subsidies are related to 

passenger transportation and not to freight transportation, some adjustments are needed to develop 

an indicator series that can be used to allocate the 

airline subsidies to the correct states: 

1. The ratio of each airline’s passenger revenue to 

total revenue is computed to indicate the degree to 

which each airline is engaged in passenger versus 

freight transportation. 

14. Because farms is a goods-producing industry, GDP by state is estimated directly; therefore, GDP by state is available for use as an indicator 

series in the estimation of subsidies. 

2. The ratio of passenger enplanements by state to 

total passengers is computed to indicate the state 

distribution of each airline’s passenger transportation. 

3. The product of these two ratios (computed in 

steps 1 and 2) is then multiplied by airline subsidies 

by company to yield an estimate of airline subsidies 

by state and company. 

4. The estimates from step 3 are summed for all airline companies in each state to yield an estimate of 

air transportation subsidies by state. 

5. Finally, the state distribution computed in step 4 

is used to distribute the GDP by Industry national 

total for airline transportation subsidies to the 

states. 

● Rail transportation subsides are allocated to the 

states on the basis of data on rail subsidies by state, 

available from the Bureau of the Census. 

● For the remaining industries that have subsidies 

(water transportation, other transportation and support activities, and banking) the national subsidies 

total by industry is distributed to the states on the 

basis of each state’s share of industry corporate capital charges. 
7 

V. Gross Operating Surplus


GROSS operating surplus (GOS) consists of proprietors’ income with inventory valuation adjustment (IVA) and capital consumption allowances 

(CCA), and other corporate capital charges. Other corporate capital charges consist of rental income of persons and CCA, corporate profits before tax with IVA 

and CCA, net interest, business transfer payments, 

nontax payments to general government agencies that 

are treated like taxes, and the current surplus of government enterprises.

15, 16 For goods-producing industries where total GDP by state is estimated directly 

from Census Bureau value-added data, corporate capital charges are computed as the difference between 

GDP by state and the other income components. For 

services-producing industries, BEA estimates corporate capital charges and computes GDP by state by 

summing the income components. 

The GOS data and estimation methods for servicesproducing industries vary among industries and between economic census (benchmark) and non-economic census years (nonbenchmark) estimation cycles 

to accommodate the availability of source data.17 This 

section focuses on GOS benchmark estimation methods because they are more complex than the methods 

used for nonbenchmark years, which typically rely 

upon extrapolations and interpolations of benchmark 

estimates using a related data series such as wages and 

salaries. 

Proprietors’ Income 

For all industries except farming, mining, and real estate, the GDP by state estimates of proprietors’ income 

with IVA and CCA are based on SPI accounts data on 

proprietors’ income with IVA. Two adjustments are 

made to the SPI proprietors’ income measure to make 

it consistent with the annual industry accounts’ measure of proprietors’ income: 

PIGDPs = PISPI – CCAdj + CCA , 

where: 

PIGDPs = GDP by state proprietors’ income, 

15. The rental income of persons, which is included as part of GDP by 

state for the real-estate industry, includes the imputed rental income 

received by the owner-occupants of farm and nonfarm dwellings which is 

an estimate of the net return to home ownership. 

16. Nontax payments generally exclude business purchases from general 

government agencies of goods and services that are similar to those provided by the private sector, and the current surplus of government enterprises. 

17. Benchmark years are the years for which data from the economic census’ are available: 1963, 1967, 1972, 1977, 1982, 1987, 1992, and 1997, and 

2002. 

PISPI = proprietors’ income from the SPI accounts, 

CCAdj = noncorporate capital consumption adjustment, and 

CCA = noncorporate capital consumption allowance. 

CCA must be added to the proprietors’ income 

component of GDP by state because it is a cost of production, but CCA is not included in the SPI measure of 

proprietors’ income. 

Both of these adjustments to the SPI measure of 

proprietors’ income with IVA are made on the basis of 

nonfarm proprietors’ income reported to the IRS. The 

national total of proprietors’ CCAdj by industry is removed, and the national total of CCA by industry is 

added to the SPI measure on the basis of each state’s 

share of the sum of the absolute values of IRS reported 

nonfarm proprietors’ income.

18 

Farm proprietors’ income 

For farms, the proprietors’ income estimates are based 

on BEA’s SPI proprietors’ income with IVA and CCAdj. 

Like the industries above, the CCAdj must be removed 

from farm proprietors’ income and CCA included. The 

estimates for CCA are based on the SPI measure of 

farm depreciation. However, the SPI measure of farm 

depreciation includes both corporate and noncorporate (proprietors’) depreciation. Farm depreciation by 

state is split into corporate and noncorporate parts 

based on the corporate and noncorporate composition 

of farm income by state. Then, each state’s share of national noncorporate farm depreciation is used to distribute the national estimates of CCA and CCAdj to 

the states. Finally, the state estimates of CCAdj are subtracted from and the estimates of CCA are added to the 

SPI farm proprietors’ income to yield farm proprietors’ income with IVA and CCA. 

Mining proprietors’ income 

For the mining industries, BEA’s SPI measure of proprietors’ income with IVA is not used because it includes income earned from limited partnerships, 

which is tabulated by the IRS as being earned in the 

state where the income recipient resides rather than in 

the state where the income is produced. For the mining 

industries, the state shares of GDP by state for the 

nation, excluding proprietors’ income with IVA and 

CCA are used to allocate the annual industry accounts’ 

18. Absolute values are used because reported proprietors’ income is 

occasionally negative, but it is the magnitude of the reported income, 

regardless of its sign, which is indicative of a level of activity. 
8 GDP by State Estimation Methodology 

measure of proprietors’ income with IVA and CCA to 

the states. 

Real estate proprietors’ income 

Similar to the mining industries, BEA’s SPI measure of 

proprietors’ income with IVA for the real estate industry is not used because it includes income earned from 

limited partnerships. The “Real Estate” subpart of Section V (Gross Operating Surplus) includes a complete 

discussion of how proprietors’ income is computed for 

this industry. 

Corporate Capital Charges 

GOS is the sum of proprietors’ income (with IVA and 

CCA) and corporate capital charges. The estimation of 

the proprietors’ income component of GOS has been 

described above. This section describes the benchmark 

year methodologies for estimating the capital charge 

components of GOS: Rental income of persons and 

CCA; corporate income components (corporate profits with IVA and CCA, net interest, business transfer 

payments); certain other nontax payments (or liabilities) to general government agencies that are treated 

like taxes; and the current surplus of government enterprises. Benchmark years are those for which the corporate capital charge estimates rely most heavily on 

state-specific source data rather than on extrapolation 

or interpolation using a related indicator series (Appendix E). The corporate capital charge benchmark 

methods are discussed in terms of goods-producing 

industries, services-producing industries, and government because of the similarities within each of these 

groups with respect to estimation methodologies and 

source data. 

Nontax payments to government 

Nontax payments to government consist of various 

items such as regulatory and inspection fees, fines and 

forfeitures, rents and royalties, and donations (Appendix F). For farms, the estimates are based on each 

state’s share of federal grazing receipts from permits 

and leases data from the Department of the Interior. 

For oil and gas extraction, the estimates are based on 

each state’s share of rents and royalties data from the 

Department of the Interior. For banking, the estimates 

are based on each state’s share of Federal Reserve Bank 

assessments from the Federal Reserve Board. For industries other than those just described, the estimates 

are based on each state’s share of unpublished wages 

and salaries from BEA. 

Services-Producing Industries 

Services-producing industries consist of all industries 

except agriculture, forestry, fishing, and hunting; mining; construction; manufacturing; and government. 

All the remaining industries are private services-producing industries. For these industries, as well as for 

the forestry, fishing, and related activities industry, 

GOS is estimated in three components: 

● Proprietors’ income with IVA and CCA, 

● Nontax payments to government, and 

● Corporate capital charges. 

The data and methods used to estimate proprietors’ 

income with IVA and CCA and nontax payments to 

government were described above. The rest of this section describes the methods for estimating corporate 

capital charges for services-producing industries. 

For most services-producing industries, GDP by 

state corporate capital charge estimates are based upon 

receipts and payroll data from the Census Bureau’s 

quinquennial economic census and upon BEA wages 

and salaries data. The exceptions to this approach are 

mainly regulated industries for which additional company financial data are available, and for which alternative estimation methods have been developed.

19 

These exceptions to the standard methodology will be 

treated separately below. The standard methodology 

uses an indicator data series to distribute the national 

GDP by Industry corporate capital charge total to the 

states. The indicator series is defined as the sum of 

BEA wages and salaries and Census receipts, after the 

Census receipts data have been adjusted (by the ratio 

of BEA wages and salaries to Census payrolls) to account for differences in establishment coverage and industry-establishment classification between Census 

and BEA: 

= 0.5 × W + 0.5 × (WSi j ⁄ CPi j) × CRi j Z , i j S , i j , , , ,

where: 


Zi,j

 = the indicator series for industry i in state j,


WSi,j = BEA wages and salaries for industry i in state j,


CPi,j = Census payrolls for industry i in state j, and


CRi,j = Census receipts for industry i in state j.


The values of the indicator series are summed across 

the states for an industry and then the national GDP 

by Industry total for corporate capital charges in the 

industry is distributed to the states on the basis of each 

state’s share of the indicator series total. This estimate 

of corporate capital charges is then added to estimated 

nontax payments and proprietors’ income with IVA 

and CCA by state to yield the estimate of GOS for each 

19. The exceptions to the standard capital charge estimation methodology 

are utilities, air transportation, rail transportation, banking, insurance carriers, real estate, and government. 
GDP by State Estimation Methodology 9 

industry. The estimates of GOS are then added to estimates of employee compensation, TOPI, and subsidies 

to yield the estimate of GDP by state for each industry. 

Utilities 

BEA estimates corporate capital charges by state for 

three sub-industry groups within the utilities industry: 

Natural gas distribution; electric power generation, 

transmission, and distribution; and water sewage and 

other systems.

20 GDP by Industry corporate capital 

charge components for the utilities industry are distributed to the three sub-industry groupings based on 

each sub-industry group’s share of the selected financial measures for utilities. These national total corporate capital charges for each of the three sub-industry 

groups are then distributed to the states on the basis of 

indicator data series specific to each of the groups. 

Natural gas distribution. The natural gas distribution portion of utilities industries’ corporate capital 

charges is distributed to the states on the basis of each 

state’s share of “total gas delivered to consumers.” 

Electric power generation, transmission, and distribution. For electric power generation, transmission, 

and distribution, a four-step procedure is used to take 

advantage of selected financial data for each company. 

1. Selected financial items from each company’s income statement and balance sheet are redefined to 

conform to BEA conventions and definitions.21 

2. The redefined measures are distributed to the 

states in which the company operates based on each 

state’s share of the company’s total generating capacity. 

3. The adjusted and distributed measures from step 

2 are summed across companies, by state, and used 

as the indicator series to distribute to the states the 

respective annual industry accounts’ capital charge 

component—net interest, corporate CCA, and corporate profits with IVA. 

4. The remaining income component—business 

transfers—is distributed to states using the state distribution of company revenues as an indicator series. 

Nontax payments are estimated separately and 

added to the corporate capital charges estimates. 

Water, sewage, and other systems. For the corporate capital charges component of corporate profits 

with IVA and CCA, the national total is distributed to 

20. The NAICS utilities industry includes natural gas distribution while 

natural gas transmission is included in the NAICS pipeline transportation 

industry. The SIC utilities industry includes both natural gas distribution 

and natural gas transmission. 

21. For additional information, see “Note 5: Adjustments to financial 

items of utilities companies” in the “Technical Notes. ” 

the states using equally-weighted Census Bureau receipts (adjusted by the ratio of BEA wages and salaries 

to Census payrolls) and BEA wages and salaries, like 

most other services-producing industries. The corporate capital charges components of net interest and 

business transfer payments are distributed to the states 

based on each state’s share of BEA wages and salaries 

for the industry. 

Air transportation 

BEA uses passenger enplanements, by company and 

airport, and airline financial data, by company, from 

the Department of Transportation (DOT) to estimate 

air transportation corporate capital charges by 

state.22, 23 The company financial measures are allocated to states using the company’s passenger enplanements by state. The resulting state distributions of the 

financial measures are then used as an indicator series 

to distribute the national GDP by Industry corporate 

capital charge components to the states.

24 

Rail transportation 

BEA estimates state rail corporate capital charges as the 

sum of corporate capital charges for Class I railroads, 

Class II railroads, and AMTRAK.

25 Accordingly, the 

national GDP by Industry corporate profits with IVA, 

CCA, net interest, business transfer payments, and 

current surplus are split among the three types of railroads before being distributed to the states. 

The AMTRAK portion of the GDP by Industry capital charge components is based on the company’s reported profit (or loss), depreciation, and interest 

expense. The AMTRAK portion of the rail transportation industry’s corporate capital charges is distributed 

to the states on the basis of AMTRAK passenger boardings by state. 

After subtracting the AMTRAK portion from the 

GDP by Industry total for railroad transportation corporate capital charges, the remainder is split between 

22. The following DOT data, by company, are used: Total property revenue plus mail revenue, total passenger revenue, subsidies, interest on long 

term debt and capital leases plus other interest expense, depreciation and 

amortization, and net income (or loss) before taxes. 

23. This NAICS industry differs significantly from the similarly-named 

SIC industry, Transportation by air. Along with several minor differences, 

large portions of the SIC industry, including courier services such as Federal Express, are not included in the NAICS industry. These differences may 

be especially large in states that serve as hubs to courier service operations. 

24. Net income (or loss) before income taxes plus depreciation and amortization is used to allocate GDP profits with IVA plus CCA; interest on 

long-term debt plus other interest expense is used to allocate net interest. 

The GDP by Industry measure of business transfer payments is allocated to 

states on the basis of passenger enplanements by state. 

25. Class I railroads are those with annual gross revenues of more than 

$250 million, and Class II railroads are those with annual gross revenues 

of $20–$250 million. 
10 GDP by State Estimation Methodology 

Class I and II railroads based on the expense, revenue, 

and profit shares of each class:

26 

● For Class I railroads, corporate CCA is distributed 

to states on the basis of the state shares of national 

structure and equipment depreciation; profits with 

IVA and business transfers are distributed to the 

states on the basis of the state shares of net revenue; 

net interest is distributed to the states on the basis of 

the state shares of interest expense. 

● For Class II railroads, corporate CCA and net interest, business transfer payments, and corporate profits with IVA are distributed to the states on the basis 

of state shares of Class II expenses, revenues, and 

profits, respectively. 

The GDP by state estimate for Rail transportation 

capital charge components by state is then the sum for 

each state of the estimated corporate capital charges 

for AMTRAK, Class I, and Class II railroads. 

Insurance carriers and related activities 

Corporate capital charges for insurance carriers and 

related activities are estimated in two parts: Insurance 

carriers, life insurance, property and casualty insurance; and insurance agents, brokerage, and related activities (which, for simplicity, will be referred to as 

“insurance agents”). The sum of corporate capital 

charge estimates for these two parts yield the corporate 

capital charges estimate for the industry in each state. 

The national total corporate capital charges for the two 

parts of the industry are obtained as a special tabulation from the GDP by Industry accounts. These national totals are then distributed to the states on the 

basis of state-level insurance industry data obtained 

from the National Association of Insurance Commissioners (NAIC). 

Insurance carriers. The national corporate capital 

charges total for insurance carriers is distributed to the 

states in three parts: 

1. The national total for corporate profits with IVA 

is distributed to the states on the basis of each state’s 

share of the total NAIC net premiums for insurance 

carriers, where “net premiums” are measured as total premiums minus losses. 

2. The national total for net settlements (actual 

losses less expected losses) is distributed to the states 

26. The financial measures (expenses, revenues, and profits) are special 

tabulations based on way-bill data, by state, and company financial reports 

from DOT. For Class I railroads, DOT provides net income before taxes, 

depreciation and amortization expense, interest expense, and total revenues, by company and state. For Class II railroads, DOT provides total revenues, expenses, and profits, by state. The difference between the total Class 

I depreciation reported by DOT and the estimated Class I CCA is added to 

the Class I profits reported by DOT and subtracted from the Class I depreciation reported by DOT in order to account for differences between financial accounting and national income accounting. 

on the basis of each state’s share of total NAIC losses 

as reported by the insurance carriers. When the national value of net settlements is negative and the reported NAIC loss is also negative, then the absolute 

value of the loss is used as the indicator value for net 

settlements for the state. 

3. The national total for corporate capital charges 

except profits and net settlements is distributed to 

the states on the basis of each state’s share of total 

NAIC premiums paid for insurance carriers. 

The insurance carriers corporate capital charges assigned to each state is then the sum of the three parts. 

The data on premiums, settlements, profits, and losses 

are recorded in the home state of the insurance underwriter, not in the home state of the insured. 

Insurance agents. The national corporate capital 

charges total for insurance agents is distributed to the 

states on the basis of each state’s share of NAIC total 

insurance premiums, recorded on a “where sold” basis. 

Using insurance premiums on a “where sold” basis 

serves to locate the economic activity in the home state 

of the insurance agents, rather than the home state of 

the underwriters of the insurance. 

Credit intermediation 

Federal Reserve Banks and depository and nondepository institutions comprise the credit intermediation 

industry. While all types of institutions are included, 

this discussion focuses on depository institutions, 

whose output is the most complex to estimate. 

The operating income of depository institutions 

(hereafter referred to as “banks”) roughly equals interest received minus interest paid and other expenses. 

Banks act as financial intermediaries for depositors 

and borrowers by granting loans with available funds 

from bank deposits and by maximizing the interest income earned from re-investment of deposits and loan 

repayments. Financial intermediation is a service to 

depositors and borrowers that is not explicitly priced 

and must be indirectly valued. The next sections review the quantification of these implicit services as 

part of bank net interest and describe the data used to 

compute the other components of corporate capital 

charges (profit, corporate capital consumption allowance, and business transfer payments). 

Financial intermediation is the implicit service of 

using funds from deposits to acquire financial assets 

by making loans and/or purchasing securities, while 

assuming financial risk, and channeling funds from 

lenders to borrowers and transforming or repackaging 

the funds with respect to maturity, scale, and risk. 
GDP by State Estimation Methodology 11 

Net Interest 

The national income and product accounts (NIPAs) 

recognize that both the interest paid to depositors and 

the interest received from borrowers have two forms of 

payment: A monetary amount and an imputed value 

for implicit services provided by the bank. The System 

of National Accounts (SNA) 1993 recommends that 

the value of implicit services be computed using a “reference rate” of interest that represents the opportunity 

cost of borrowing or lending and does not include a 

risk premium or any intermediation services. In agreement with the NIPAs and SNA, the regional product 

accounts estimate the four gross interest flows for 

commercial banks by state: Monetary interest paid 

(MIP), imputed interest paid (IIP), monetary interest 

received (MIR), and imputed interest received (IIR). 

Therefore, net interest earned by commercial banks 

equals the sum of monetary and imputed interest paid, 

less the sum of monetary interest received and imputed interest received: 

Net interest = (MIP + IIP) – (MIR + IIR) . 

Net interest for the credit intermediation industry 

equals the sum of net interest from each type of institution: Commercial banks, savings and loan associations, savings banks, credit unions, Federal Reserve 

Banks, and nondepository institutions. The difference 

between the sum of net interest by state and the NIPA 

value is distributed to the states based on the computed series of net interest by state. The next sub-sections discuss the computation of net interest by type of 

institution. 

Commercial bank net interest. Monetary interest 

paid is distributed to each state with domestically-located commercial bank deposits. The state distribution 

of commercial bank interest income is used to distribute national monetary interest received to the states. 

Imputed interest paid by banks to depositors equals 

the reference rate, less the interest rate received by depositors, multiplied by average deposit liabilities. Similarly, imputed interest received by banks from 

borrowers equals the interest rate paid by borrowers, 

less the reference rate, multiplied by average earning 

assets. 

Savings institutions net interest. The state distribution of savings institutions (savings and loan associations and savings banks) deposits is used to distribute 

national net interest for both types of institutions to 

the states. The reference rate approach may be applied 

to savings institutions as a part of a future benchmark 

revision in methodology. The computations would be 

similar to those employed to compute commercial 

bank net interest. 

Federal Reserve Banks net interest. The Federal Reserve Banks do not pay monetary interest. Therefore, 

net interest for each state with a Federal Reserve Bank 

equals monetary interest received. (The value of implicit services, net of the opportunity cost of required deposits, is assumed to be zero for Federal 

Reserve Banks).

27 

Nondepository institutions net interest. Nondepository net interest for economic census years is distributed to each state using an equal weighting of 

census receipts and SPI wages and salaries. These estimates are extrapolated or interpolated with the annual 

percent change in wages and salaries to compute nondepository net interest for non-economic census years. 

Profits before taxes 

Depository profits. The NIPAs include profits estimates for the following types of banking institutions: 

Federal Reserve Banks, commercial banks, savings and 

loan associations, savings banks, Federal Home Loan 

Banks, credit unions, bank holding companies, and 

nondepository institutions. With the exceptions of 

credit union and bank holding company profits, the 

sum of net operating income and allowance for loan 

and lease losses by state provides the information necessary to distribute the NIPA national profits estimates 

to the states by type of institution. (The state distribution of compensation of employees is used to distribute national credit union profits to each state.) The 

financial data for commercial banks, savings and loan 

associations, and savings banks are adjusted to account 

for banks that operate branch banks in a different state 

(interstate branching). Bank holding company profits 

from the NIPAs are distributed to each state using 

bank holding company profits by state. 

Nondepository profits. For economic census years, 

the value of nondepository profits from the NIPAs is 

distributed to the states using an equal weighting of 

census receipts data and SPI wages and salaries. For 

non-economic census years, nondepository profits 

estimates are computed by extrapolating or interpolating economic census year’s values using the annual 

percent change in SPI wages and salaries. 

CCA and business transfer payments (BTP) for 

depository and nondepository institutions 

Depository CCA and BTP. The remaining corporate 

capital charges components consists of corporate CCA 

and BTP. The national value of the CCA and BTP components of capital charges are distributed to the states 

27. Under the National Bank Act of 1863, national banks are required at 

all times to maintain specified reserves based on the level of deposits in the 

bank. 
12 GDP by State Estimation Methodology 

in two parts: Federal Reserve and all other depository 

institutions. Federal Reserve Bank CCA is depreciation 

on land and equipment and is assigned to the states 

where it is reported. BTP are assumed to apply to only 

non-Federal Reserve Banks. BTP and CCA from the 

NIPAs, less the Federal Reserve Bank CCA, are distributed to all institutions, except Federal Reserve Banks, 

using the state distribution of compensation of employees. 

Nondepository CCA and BTP. For economic census years, the value of nondepository CCA and BTP 

from the NIPAs is distributed to the states using an 

equal weighting of census receipts data and SPI 

wages and salaries. For non-economic census years, 

nondepository CCA and BTP estimates are computed 

by extrapolating or interpolating economic census 

year’s values using the annual percent change in SPI 

wages and salaries. 

Total capital charges for depository and 

non-depository institutions 

The total state corporate capital charges for depository 

and nondepository institutions, excluding nontax payments to government, equals the sum of profits, CCA, 

BTP, and net interest for each institution. To ensure 

consistency with the national accounts, the difference 

between the sum-of-states estimates and the national 

corporate capital charges value is distributed to the 

states based on the estimates of the state corporate capital charges. 

Real estate 

The GOS estimates methodology for the real estate industry takes advantage of the availability of data from 

the decennial Census of Housing and other sources. 

Real estate GOS is divided into “other” real estate and 

housing services. Other real estate is the portion of the 

real estate industry engaged in renting or leasing real 

estate to others; managing real estate for others; selling, 

buying, or renting real estate for others; and providing 

other real estate related services, such as appraisal services. Output from the housing services industry is the 

imputed rental value of owner-occupied permanent 

site homes, owner-occupied manufactured homes, and 

tenant-occupied homes. 

The estimation of state GOS for the real estate industry differs from most industries because total state 

GOS is estimated and then split into corporate capital 

charges and proprietors’ income. This slightly-different approach of estimating proprietors’ income is necessary because the state estimates of proprietors’ 

income from the SPI accounts are based on IRS tax 

records which record income by place of residence. 

Since GDP by state is measured by place-of-work, the 

real estate proprietors’ income must be adjusted to account for this measurement difference. This location 

adjustment to proprietors’ income is not necessary for 

most industries.

28 

Housing services 

The estimation of GOS for the housing services industry requires several steps: 

1. The national GOS for real estate is split into two 

parts, “housing services” and “other real estate” on 

the basis of corporate capital charge data for each 

part, available from the GDP by Industry accounts. 

2. The national total GOS for the housing services 

portion of the real estate industry is split into three 

parts by type of housing—owner-occupied housing 

for permanent site, manufactured homes, and tenant-occupied housing—on the basis of data obtained from the NIPAs on net interest, CCA, and 

rental income of persons for each of these three 

housing types. 

3. The national GOS for owner-occupied permanent site and manufactured homes is distributed 

to the states using estimates of state imputed 

rents from the SPI accounts for these two housing 

types. 

4. For decennial census years, tenant-occupied 

housing rent estimates are computed by multiplying 

median rent and number of units statistics from the 

Decennial Census of Housing and Population. Noneconomic census years values are interpolated or extrapolated with the percent change in nonfarm personal income. 

5. The GOS estimates for the three housing types are 

summed along with tenant-occupied farm housing 

from the SPI accounts, to yield an indicator series 

for housing services. 

6. The state indicator series for housing services is 

used to distribute the national total for housing services GOS to the states on the basis of each state’s 

share of the indicator series total. 

7. GOS is split into corporate capital charges and 

proprietors’ income using the ratio of national proprietors’ income to GOS. 

8. The rental income from farm housing is added to 

the estimate of proprietors’ income computed in 

step 7. 

Other real estate 

The national totals for corporate capital charges and 

proprietors’ income for other real estate are distributed 

28. Many proprietors in the mining and real estate industries are more 

accurately characterized as investors than owners and they often do not live 

in the same state as the establishment they own. Consequently, this adjustment tends to be large for these industries. 
GDP by State Estimation Methodology 13 

to the states on the basis of Census Bureau receipts 

data for this piece of the real estate industry. Census 

Bureau receipts data are available only for economic 

census years. For non-economic census years, the corporate capital charges and proprietors’ income estimates are computed by extrapolating or interpolating 

economic census years’ values using the annual percent 

change in SPI wages and salaries. 

Federal, state, and local government 

In the regional accounts, the government sector consists of Federal civilian government, Federal military, and state and local government. For Federal 

civilian government and state and local government, 

GOS consists of the surplus or deficit of government 

enterprises, the consumption of fixed capital (CFC) for 

government enterprises, and the CFC for general government. For Federal military, GOS consists of CFC 

only. 

Federal government 

The national measure of Federal military CFC is distributed to the states using each state’s share of active 

military personnel. However, the national measure of 

Federal military CFC is adjusted to include only domestic structures and office equipment.29 

The national measure of Federal civilian CFC (general government and government enterprises) is distributed to the states using each state’s share of federal 

civilian employment. The remaining component for 

Federal civilian GOS is the surplus or deficit of government enterprises. 

The twelve federal government enterprises for 

which surplus or deficit is estimated can be classified 

into four categories: 

● The United States Postal Service (USPS), 

● Federal power authorities, 

● Federal insurance programs, and 

● Other federal enterprises.

30 

The methodologies for allocating the national measure of surplus or deficit, by government enterprise 

and state, are discussed below in terms of these four 

29. All military equipment and structures located overseas and mobile 

military equipment located domestically are excluded from the CFC in the 

GDP by state accounts, but included in the national measure. The CFC, 

excluding the part which is attributable to mobile equipment, is adjusted to 

exclude overseas equipment and structures based on the ratio of domestic 

troop strength to total troop strength. 

30. The twelve Federal enterprises are the U. S. Postal Service, Military 

post exchanges and restaurants, Bonneville Power Administration, Southeastern Power Administration, Southwestern Power Administration, Upper 

Colorado River Basin Fund, Tennessee Valley Authority, Federal Housing 

Administration Fund (FHA), Veterans Canteen Service, Federal Crop 

Insurance, National Flood Insurance, and the U. S. Enrichment Corporation. 

categories. 

Because the GDP by state for the USPS includes neither proprietors’ income nor TOPI, GOS for each state 

can be estimated as the difference between USPS value 

added and USPS employee compensation. State estimates of USPS value added are made by distributing 

national total USPS value added to the states on the 

basis of each state’s share of USPS revenues. State estimates of USPS employee compensation are made by 

distributing national USPS employee compensation to 

the states on the basis of each state’s share of USPS 

wages and salaries.

31 The difference between these two 

estimates, value added and employee compensation, 

for each state is then the estimate of USPS GOS for 

each state. 

State estimates of GOS for each of the federal power 

authorities are derived by distributing each power authority’s total surplus or deficit to the states on the basis of each state’s share of the power authority’s 

generating capacity.

32 

State estimates of the surplus or deficit for the two 

federal insurance programs—flood insurance and crop 

insurance—are derived in calculations by distributing 

each insurance program’s total surplus or deficit to the 

states on the basis of each state’s share of the insurance 

program’s premiums received plus indemnities paid. 

For the remaining federal government enterprises in 

the “all other” category: 

● The surplus or deficit of the Federal Housing Administration (FHA) Fund is distributed to the states 

based on the insured mortgage activity by state, 

● The surplus or deficit of military post exchanges and 

restaurants is distributed to the states based on the 

number of military personnel (active, retired, and 

reserve) by state, 

● The surplus or deficit of the Veterans Canteen Service is distributed to the states based on canteen 

sales by state, and 

● The surplus or deficit of the U. S. Enrichment Corporation is distributed to the states based on the 

value of uranium sales by state. 

State and local government 

The GOS estimates consist of the surplus or deficit of 

sixteen state and local government enterprises, the 

31. Wages and salaries for the USPS are available from the SPI series. 

Employee compensation is wages and salaries plus supplements. USPS supplements, nationally, are estimated by multiplying BEA’s measure of supplements for all enterprises by the ratio of USPS wages and salaries to the 

wages and salaries for all enterprises. 

32. Information on the state distribution of generating capacity is 

obtained from each power authority. 
14 GDP by State Estimation Methodology 

CFC for these enterprises, and state and local general 

government CFC.

33 

In general, state and local government revenues less 

expenditures, for each enterprise and state, from the 

Census Bureau are used to distribute to the states the 

national surplus or deficit of each state and local government enterprise. Exceptions are off-track betting 

which is assigned to New York, the Alaska Ferry which 

is assigned to Alaska, and miscellaneous commercial 

33. The state and local government enterprise functions are: Housing and 

urban renewal, water supply, sewerage, natural gas, electricity supply, toll 

highways, off-track betting, Alaska ferry, water terminals, air terminals, 

transit, liquor stores, lotteries, miscellaneous commercial activities, parking 

facilities, and miscellaneous insurance trusts. 

activities which are distributed to the states based on 

each state’s share of population. 

The CFC for state and local government (general 

government and government enterprises) is distributed to the states based on each state’s share of state 

and local government employment. 

Finally, the components estimated above for state 

and local government—the surplus or deficit of 

state and local government enterprises, the CFC for 

state and local government enterprises, and the 

CFC for state and local general government—are 

summed yielding the GOS for state and local government. 
----------------------------------

---------------------------------------------------

15 

VI. Real GDP by State


Chain-weighted quantity indexes 

B EA prepares chain-type quantity indexes, by industry, for the nation, but state-level information 

on prices by industry is not available, so estimates of 

real GDP by state are derived by applying nationallevel industry implicit price deflators to the current 

dollar GDP by state estimates for the detailed industries. Real GDP by state for the aggregate industries 

(such as total services, manufacturing, and so on) is 

derived by using the same chain-type index formula 

that is used in the national accounts. 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), real GDP by state captures the relative 

differences in the mix of goods and services that states 

produce. However, real GDP by state does not capture 

state-to-state differences in the prices of goods and services that are produced and sold locally. 

Unlike fixed-weighted measures, chain-weighted 

measures are not based on the price weights of a single 

base year, but on the prices and quantities of adjacent 

years. Fixed-weighted measures have a number of disadvantages, including the need for periodic rebasing, 

leading to significant revisions to the historical data, 

and the inability to capture substitution effects caused 

by changing relative prices of goods and services. 

Chain-weighted measures avoid these weaknesses. 

However, chain-weighted measures do have some disadvantages; they are not additive, because they are 

based upon geometric means, and they are more difficult to compute than fixed-weighted measures. The 

non-additivity of chain-weighted measures means that 

total real GDP by state cannot be obtained by summing the real GDP by state of each industry. As a result, the contribution of each industry to a change in 

real total GDP by state is not readily computable. The 

computation of contributions to growth is described 

later in this section. 

To calculate a chain-type quantity index for total 

GDP by state, or GDP by state of any aggregate industry, a Fisher Ideal index is used. The Fisher Ideal index 

is the geometric mean of the Laspeyres and Paasche 

quantity indexes. The Paasche quantity index is defined as: 

Σ(pi 2, × qi 2) , 

P = ---------------------------------- 1 2

i , Σ(pi 2, × qi 1) , , i

and the Laspeyres quantity index is defined as: 

Σ(pi 1, × qi 2) , 

= ---------------------------------- L1 2, Σ 

i

(pi 1, × qi 1, ) . 

i

The Fisher quantity index is the geometric mean of 

the Paasche and Laspeyres quantity indexes for adjacent years: 

Σ(pi 1, × qi 2) 

i , 

= L1 2, × P1 2 F = 1 2, , Σ(pi 1, × qi 1) , i

Σ(pi 2 × qi 2) 

i , , 

× ----------------------------------

Σ(pi 2, × qi 1) . , i

However, in the above formula, the variables that 

represent the composites of prices in one year and 

quantities in an adjacent year (for example, pi,1 x qi,2) 

are not directly observable, so an algebraically-equivalent formula is used to calculate the Fisher quantity index: 

,

Σ 

p

-------- i 1 × (pi 2, × qi 2) 

i pi 2 , , F = 1 2, Σ(pi 1, × qi 1) 

i , 

Σ(pi 2, × qi 2)

i , 

× --------------------------------------------------- pi 2,

Σ -------- × (pi 1 × qi 1) 

i pi 1 , , . , 

The Fisher quantity index measures the percent 

change in real quantities between adjacent years. To 

obtain a time series, successive indexes are calculated 

and then chained together by arbitrarily setting the 

first year equal to 1.0 and iteratively multiplying the 

current year’s index by the next year’s index. To change 

the reference year (there is no “base year,” in the sense 

that there is in the case of fixed-weighted indexes) of 

the series, one must only divide each element of the series by the value of the index for the desired reference 

year. Real chained-dollar GDP by state estimates are 

calculated from the chained Fisher Ideal index series by 

multiplying the index for each year by the current-dollar GDP by state value for the reference year. For display purposes, the indexes are commonly multiplied 

by 100, to set the reference year value to 100.0 rather 

than 1.0. 
16 GDP by State Estimation Methodology 

Contributions to real growth 

Real chain-weighted GDP by state is not additive (except for the trivial case of the reference year, when the 

real and nominal dollar values are the same), because 

the underlying quantity indexes are geometric means 

of indexes from adjacent years. As a result, the contribution of each individual industry or region to a 

change in total GDP by state cannot be calculated simply by dividing the change in a component (an industry or a region) by the change in the total. Instead, a 

more complicated approach is required to account for 

the non-additivity of the real GDP by state measures. 

The formula below is used to calculate the contribution of component i to the percent change in total real 

GDP by state: 

oΔi t

((pi t ⁄ Pt

F

) + p

F

i t , – 1) ×( , – , – 1) , qi t qi t Co =100 × ---------------------------------------------------------------------------------------- , 

Σ ((pj t , ⁄ Pt ) + , – 1) × , pj t qj t – 1 , j

where: 

Pt

F is the Fisher price index for the aggregate in period t relative to period t–1, 

Pi,t is the price of component i in period t, and 

q i,t is the quantity of component i in period t. 
17

VII. Future Developments


Extending the GDP by state-NAICS time 

series 

CURRENTLY, the GDP by state estimates on a 

NAICS basis are available only for years 1997 forward. The GDP by state estimates rely heavily on two 

major data sources—(1) wages and salaries data from 

the Bureau of Labor Statistics (BLS), and (2) valueadded, receipts, and payroll data from the Census Bureau’s economic censuses. The first year the economic 

census is recorded on a NAICS basis is 1997. In December 2004, when the NAICS-based GDP by state 

data were first released, the BLS wages and salaries 

data were only available on NAICS for 1997 forward. 

Since that time, BLS has released wages and salaries 

data on a NAICS basis back to 1990. 

To provide our customers with a longer NAICS time 

series, BEA has undertaken two research efforts. The 

first is the estimation of compensation of employees 

and proprietors’ income on a NAICS basis for 1990 

through 2000. BEA has completed preliminary research, and has released state estimates of compensation of employees and proprietors’ income for NAICS 

industries in the fall of 2006. 

Second, BEA has entered into a joint effort with the 

Census Bureau’s Center for Economic Studies (CES) to 

recode the 1992 economic census from SIC to NAICS. 

After completion of this effort, BEA will estimate 

the NAICS-based GDP by state estimates for years 

1992–1996. 

Improving the timeliness of the GDP by state 

estimates 

In December, 2004 BEA released the first set of advance total GDP by state estimates in current dollars. 

And in the fall of 2005, BEA released the first set of advance GDP by state industry estimates. Advance GDP 

by state estimates are now released on a regular basis. 

Advance total GDP by state estimates for the previous 

calendar year are released in June and industry estimates are released in October. At this time, the advance 

GDP by state estimates do not include any of the GDP 

by state income components. 

BEA is currently working on improving the accuracy of the advance GDP by state industry estimates 

and plans to release the advance 2006 total GDP by 

state and industry estimates in June, 2007, while investigating the feasibility of producing advance estimates 

of the GDP by state income components. 

GDP by metropolitan area estimates 

To provide our users with gross metropolitan product 

(GMP) estimates, BEA has included, as part of its recent Strategic Plan, an investigation of the feasibility of 

producing GMP estimates. Although this effort has not 

yet been fully funded, BEA has developed illustrative 

“top-down” GMP estimates that are based on county 

earnings by industry from the local area personal income (LAPI) accounts and GDP by state by industry. 

The illustrative estimates include both current and real 

chained-dollar GMP for 81 NAICS industries. These 

estimates provide a more accurate picture of GMP 

than those published by private companies because the 

illustrative GMP estimates are: (1) consistent with the 

published GDP by state estimates, (2) consistent with 

estimates produced by BEA’s national accounts, and 

(3) are based on source data without disclosure edits. 

If BEA is funded for further development of GMP, 

additional improvements may include the development of a bottom-up estimation methodology that is 

consistent with the GDP by state estimation methodology. This effort will require BEA to gather additional 

county and metropolitan area source data and to design and develop a computer estimation system to produce the estimates. 
18 

VIII. Technical Notes


Note 1: Interpolation and extrapolation 

procedures 

F REQUENTLY, source data required as inputs for 

the GDP by state estimates are not available for 

one or more years in a time series. For example, some 

data may be available only for the years corresponding 

to a quinquennial or decennial census. Then it is often 

possible to estimate reasonable values for the missing 

data by interpolation or extrapolation on the basis of 

available data and a related data series. 

All data interpolations used in the GDP by state estimates are growth rate interpolations. That is, they are 

geometric rather than linear interpolations. 

Consider a case in which data are available only at 

five-year intervals: 

X={x0,x5,x10,..., x25} . 

Values for intermediate years need to be estimated 

by interpolation. 

Whenever possible, a time series of related data are 

used to compute the interpolated values in the time series X, above. If the data being interpolated were, for 

example, payroll or value-added data by industry and 

state, then a related series to be used might be BEA 

wage and salary accruals by industry and state: 

W={w0,w1,w2,w3,w4,..., w25} . 

The wage and salary data, W, are available for all 

years in the time series, so the interpolated values for X 

can be tied to the available values of W by interpolating the ratio between the two series. For the years for 

which values of X are available, compute the ratios between the values of X and the values of the related series W: 

where rt = wt xt . 

The interpolated values of these ratios are then 

computed by applying the average annual growth rate 

between available ratio values, which are directly computable just every five years in the current example: 

Δ = t t, + 5 5 rt 5 + rt . 

The value is the annual geometric factor (technically, it is 1.0 plus the average annual growth rate in the 

ratio) for computing interpolated values of the ratios 

between the related data series W and the missing 

values X: 

r1= Δ0 5 × r0 ⇒ = w1 ⁄ ( , × ) , , x1 Δ0 5 r0

w2 w2 r2= , × r1 ⇒x2 =--------------------- ⇒x2 Δ = --------------------- 0 5 Δ0 5 × r1 2

, × , , Δ0 5 r0

and so on until all the missing values of X have been 

computed. 

One limitation of the geometric interpolation 

method outlined here is that it is useless if the endpoint values being interpolated are of opposite sign. 

There is no constant annual growth rate, and therefore 

no value of Δ , that will carry one monotonically from 

a negative number to a positive one, or vice versa. (A 

negative value of Δ may be found to traverse the interpolation period and connect the available endpoints; however, it would do so by oscillating annually 

between negative and positive values—not generally a 

desirable result.) In these cases, a linear interpolation 

of the ratios between X and W may be the only solution, but one needs to carefully review the results of 

any such interpolation, inasmuch as the construction 

of the ratio—which value is the numerator and which 

is the denominator—will affect the shape of the resulting interpolated time series, sometimes in surprising 

fashion. 

A similar approach can be used to extrapolate values 

of X. In this case, one would need to decide what value 

to assign to Δ . Assigning Δ a value of 1.0 keeps the 

ratio between X and W constant during the extrapolation period ( Δ is 1.0 plus the annual growth rate, so a 

value of 1.0 implies a zero growth rate for the ratio). 

However, it may be possible, through regression analysis or other means, to identify a time trend in the relationship between X and W. The value may then be 

non-zero, but the algebra of the extrapolation would 

be the same. 

Note 2: Allocation and dual allocation 

procedures 

Estimation of state values for the components of GDP 

by state often involves the distribution of a pre-determined national total to the states on the basis of the 

state values of an indicator series. An indicator data series is a data set with a known distribution—usually a 

distribution across states. In the context of GDP by 

state estimation, it is assumed to be similar to the unknown state distribution of the national total. For example, in the absence of better information, it may be 

assumed that a tax for an industry is distributed across 

the states as employee compensation is distributed, so 

the state estimate for the tax would be derived by applying the industry’s distribution of employee compensation to the national total for the tax for the 

industry. 

It is often the case that the indicator series is itself a 

first estimate of the data being estimated, such as adjusted value-added data from the Census Bureau, 
GDP by State Estimation Methodology 19 

which provide the first estimate of GDP by state for 

the manufacturing industries. In these cases the objective is to reconcile the first estimate with a predetermined control total, usually a national total, to which 

the state-level estimates must sum. 

The procedure used to distribute a national total according to an indicator series, or to reconcile a first estimate to a control total, is commonly referred to as 

allocation, because a control total is “allocated” or 

shared out to the states. This procedure can be expressed algebraically as: 

xˆi = XUS

∗⎜

⎛ zi 51 ⎞

Σ=

zj

⎠

⎟ ⎝ j 1 , where: 

xˆi = the state i estimate for some component of GDP 

by state; 

XUS = the predetermined national total being distributed to the states; and 

zi = the state i value of indicator series Z, being used to 

allocate the value of XUS to the states (which may be 

the first estimate of the data being estimated). 

In practice, it is often advisable to perform data allocations using the absolute values of the indicator series, so the above formulation would become: 

zi 51 ⎞

xˆi = XUS

∗⎜

⎛

z ⎟ Σ j ⎝ j 1 = ⎠ .

Basing the allocation on absolute values has advantages when either the indicator series or the national 

total being distributed may contain negative numbers, 

as commonly occurs when the data are net values, such 

as net interest. 

A refinement of this allocation procedure is sometimes used when additional information is available. 

For example, national property tax totals are available 

by industry, so the allocation procedure just described 

could be used to distribute those industry totals to the 

states, using compensation of employees or some other 

indicator series as the distributor. However, information is also available on all-industry total property tax 

payments by state, so an additional constraint can be 

placed on the estimates of property tax payments by 

industry and state. This is accomplished using a dual 

allocation procedure. 

A dual allocation is an iterative application of the allocation procedure described above, with the allocation first to one set of totals, and then to a second set; 

the procedure is repeated until the estimated values 

converge to a solution in which all constraints are satisfied. Convergence to a solution requires the two sets 

of controls to be mutually consistent. Thus, using the 

property tax example again, the national property tax 

totals by industry can be summed across industries to 

yield a national all-industry total for property taxes, 

and the state-level all-industry property tax totals can 

be summed across states also to yield a national all-industry total for property taxes. These two totals must 

agree, or the dual allocation procedure will never converge to a single solution. 

Note 3: Estimates of national totals for TOPI 

Taxes on production and imports (TOPI) consist of 

federal excise taxes and state and local taxes. National 

values are estimated for 83 detailed taxes, by industry. 

These detailed tax estimates are then used as inputs to 

the estimation of GDP, GDP by Industry, annual I-O 

accounts, and GDP by state. 

The national TOPI estimates are based upon data 

from BEA, the Internal Revenue Service (IRS), the 

Treasury Department, the Department of Transportation (DOT), the Census Bureau, and state government 

agencies. Depending upon the data available, the national tax estimates may be either estimated with national data only or estimated with state-level data and 

then aggregated to national estimates—sometimes referred to as a “bottom-up” approach. Several of the 

bottom-up estimates incorporate Census Bureau data 

from special tabulations that provide detailed tax-byindustry data for each state.

34 

Federal excise taxes by industry 

Federal excise taxes (FETs) are estimated using national tax collections data from the Statistics of Income 

(SOI) Bulletin and national all-FET totals from BEA. 

The SOI tax collections are by fiscal year and listed by 

type of excise tax. The SOI tax collections are adjusted 

from fiscal year to calendar year and the excise taxes 

are aggregated to broad BEA tax categories. Shares of 

the BEA tax categories are computed for the SOI FETs 

and then applied to the national control total for the 

tax category. The resulting FET estimates are then assigned to the appropriate industries. 

State and local taxes by industry 

The national state and local all-industry tax totals 

are estimated from Census Bureau state and local tax 

receipts. These all-industry totals by tax are distributed 

across industries and states according to the methods 

described below. 

● State and local general sales taxes are bottom-up 

estimates based upon reports collected from the 

34. In cases where the latest year(s) of source data are not available, the 

most recent year of available source data is used. 
20 GDP by State Estimation Methodology 

individual states and upon Government Finance 

data from the Census Bureau. The data are aggregated across states to yield national estimates by 

industry. The national estimates by industry for 

revised years are computed by applying the best 

change in the sum-of-state industry estimates to the 

previously published national industry values. The 

estimates by industry are then controlled to the 

national total for general sales taxes. 

● State and local property taxes by industry are estimated using national industry property tax data 

and current-cost net stock of private fixed assets 

(“capital stock”) data from BEA. The property tax 

estimates for farms are developed as part of BEA’s 

GDP estimate. Property tax estimates for three 

industries: rail transportation, telephone and telegraph, and insurance carriers are based upon industry data from DOT, FCC, and the American Council 

of Life Insurance, respectively. Property taxes for 

residential real estate are obtained from the NIPAs. 

The sum of property taxes for the three industries 

listed above and property taxes for residential real 

estate is subtracted from the all-industry property 

tax total to yield a residual, which is distributed to 

the residual industries according to their relative 

shares of capital stock. 

● State and local motor vehicle license taxes are bottom-up estimates obtained using Census Bureau 

state totals for motor vehicles license taxes, DOT 

registration fees by state, national estimates of current-cost net stock of fixed private capital (capital 

stock) for autos and for trucks, and the national motor vehicle license tax total from the 

NIPAs. 

The national motor vehicle license tax total includes only business license taxes, which is what is 

needed in the computation of TOPI–personal motor vehicle license tax payments are not part of GDP 

by state. But the Census Bureaus’ state and national 

values contain both business and personal license 

taxes, so the nonbusiness payments portion needs 

to be removed. To compute business motor vehicle 

license taxes by state, the ratio of BEA’s national 

level of motor vehicle license taxes (which excludes 

personal motor vehicle license tax payments) to the 

Census Bureau’s national measure of motor vehicle 

license taxes (which includes personal motor vehicle 

license tax payments) is computed and applied to 

the Census state totals for motor vehicle license 

taxes, yielding business motor vehicle license taxes 

by state. 

The DOT supplies total motor vehicle registration fees and autos registration fees by state. These 

data are used to split the state business motor vehicle license taxes, computed above, into the amount 

for autos and for trucks. The autos share of total fees 

is applied to the state business motor vehicle license 

tax total yielding business taxes for autos by state. 

Trucks fees are computed as a residual. Industry 

values for auto business taxes by state are computed 

by applying the national industry distribution of 

capital stock for autos to each state’s auto license tax 

total. The same procedure is applied to trucks, using 

capital stock for trucks. The final national estimates 

for motor vehicle license taxes by industry are generated by summing the state/industry values for autos and trucks. 

● Taxes from motor fuel sales, tobacco sales, insurance 

sales, hunting and fishing licenses, building permits, 

pari-mutuel sales, amusement sales, and amusement licenses each affect only one industry, so the 

national control total for each tax is assigned to the 

affected industry. 

● Alcohol license taxes are distributed to the industries by applying national industry shares of the tax 

(obtained from the GDP by Industry accounts) to 

the national total for alcohol license taxes. 

● Corporate franchise taxes are distributed to the 

industries by applying national industry shares of 

SOI capital stock to the national total for the tax, 

except for farms where the value is set to zero. 

● The TOPI category “other taxes” is estimated using 

data from NIPA tax receipts and the industry distribution series of BLS wages and salaries. The four 

NIPA series of forest taxes, telecommunication 

taxes, auto rental taxes, and litigation fees and services are assigned to the appropriate industries. BLS 

wages and salaries are used to distribute the remainder of “other taxes” to the industries. 

● Several categories of taxes, severance taxes, alcohol 

sales taxes, utility sales taxes, documentary and 

stock transfer taxes, other selective sales taxes, and 

occupational and business license taxes, are bottomup estimates based upon Census Bureau special tabulations providing state data on specific taxes 

within each category. The Census Bureau totals for 

each tax are summed across states and scaled to be 

consistent with the national total for each tax. The 

industry values are then computed by applying the 

relative shares of the Census Bureau special tabulations to the state totals for each tax. The final 

national estimates are the state sums by tax for each 

affected industry. 

● The utility license tax estimates are assigned to the 

industries in the same proportions as the utility 

sales tax estimates. 

● Special assessments are assigned to the real estate 

industry. 
GDP by State Estimation Methodology 21 

Benchmark vs. nonbenchmark estimates 

The same input series are used to generate benchmark 

and nonbenchmark year’s estimates with one significant exception. Severance taxes, alcohol sales taxes, 

utility sales taxes, documentary and stock transfer 

taxes, other selective sales taxes, and occupational and 

business license taxes are estimated using tax receipts 

data that were tabulated only for benchmark years due 

to resource constraints. Updating the tax receipts series 

involves obtaining detailed state tax receipts data from 

the Census Bureau, reviewing printed or online copies 

of state government reports, and in many cases contacting state government agencies for more detailed information or clarification. Nonbenchmark year’s 

estimates are filled in by linear interpolation. 

Note 4: Estimates of national totals for nontax 

payments 

Rents and royalties 

Rents and royalties data are obtained from the Minerals Management Service of the U. S. Department of the 

Interior. Federal rents and royalties from the Outer 

Continental Shelf (OCS), obtained from the NIPAs, 

are assigned to the oil and gas extraction industry. 

State and local rents and royalties, also obtained 

from the NIPAs, are assigned to the real estate industry. 

Business transfer payments to government 

Federal nontax payments by industry. Federal nontax 

payments are estimated using national Federal nontax 

payments series from the NIPAs and detailed tax payment data from the Treasury Department’s data appendices. The first step in the estimation of Federal 

nontax payments is to assign as many NIPA series as 

possible to the appropriate industries (e.g., FDIC premiums to depository institutions, federal grazing fees 

to farms). The sum of these direct industry assignments is then subtracted from total federal nontax payments yielding total miscellaneous receipts. 

A further industry assignment of miscellaneous receipts is done based on the title or description of coverage in Table A of the Treasury appendices. The 

remaining series are “undefined.” Using Treasury miscellaneous receipts data as the allocation series, a distribution of defined (industry) receipts is applied to 

total defined miscellaneous receipts, computed above, 

yielding a dollar value for defined industry miscellaneous receipts. 

BLS wages and salaries are used to distribute total 

undefined miscellaneous receipts to the appropriate 

industries. 

State and local nontax payments by industry. State 

and local nontax payments are estimated using national tax receipts totals obtained from the NIPAs and 

BLS wages and salaries. Specific items, such as tobacco 

settlement payments and the Exxon fine, are assigned 

to the appropriate industries. BLS wages and salaries 

are used to distribute the residual nontax payments to 

the remaining industries. 

Note 5: Adjustments to financial items of utilities 

companies 

BEA adjusts the profits and depreciation plus amortization reported to the Federal Energy Regulatory 

Commission (FERC) by utilities companies to make 

them consistent with the conventions used in the 

NIPAs. The three steps below describe the adjustments 

to operating expense, operating income, and net interest: 

1. The adjustment to operating expenses of each 

company consists of the net provision for deferred 

income taxes divided by the corporate statutory tax 

rate: (P C– ) Δ = ----------------- where:	 r , 

Δ = the adjustment made to company operating expenses, 

P = provision for deferred income taxes, 

C= provision for deferred income taxes (credits), 

and 

r = statutory corporate income tax rate. 

The adjusted operating expenses value is combined 

with reported depreciation expense plus amortization to yield the indicator series used to distribute to 

the states the national corporate CCA for utilities 

companies. 

2. The same adjustment is made to reported net 

utility operating income. Then the following financial items are added to the adjusted value of operating income: 

●� Reported federal income taxes on operating and 

other income, 

●� Reported net investment tax credit adjustments, 

●� Reported total other income less other income 

deductions, and 

● Reported loss on disposition of property. 

This adjusted net utility operating income is then 

used to distribute to the states the national industry 

total of corporate profits with IVA minus taxes other 

than income taxes (because those are accounted for 

in TOPI) minus the sum of allowance for borrowed 

funds used during construction plus net interest 

charges. 

3. The sum of net interest charges and allowance for 

borrowed funds used during construction is used as 

the indicator series to distribute to the states the national utilities industry net interest total. 
22

Appendix A 

The Relation of Gross Domestic Product by State and U.S. Gross Domestic Product, 2004 

[Billions of dollars] 

U.S. GDP (1) 

GDP by state 

Compensation 

of employees 

Taxes on 

production 

and imports 

Gross 

operating 

surplus 

Total 

Difference 

between 

GDP and 

GDP by state 

Compensation of employees....................................................... 

Wages and salaries ..................................................................... 

Supplements to wages and salaries: 

Employer contributions for employee pension and insurance 

funds ...................................................................................... 

Employer contributions for government social insurance.......... 

Taxes on production and imports ............................................... 

Less: Subsidies ............................................................................ 

Gross operating surplus .............................................................. 

Equals: Gross domestic product ................................................ 

6,693.4 

5,395.2 

895.5 

402.7 

852.8 

43.5 

4,231.5 

11,734.2 

6,671.9 

5,381.5 

888.5 

402.0 

.................... 

.................... 

.................... 

6,671.9 

.................... 

.................... 

.................... 

.................... 

852.8 

43.5 

.................... 

809.4 

................... 

................... 

................... 

................... 

................... 

................... 

4,174.1 

4,174.1 

6,671.9 

5,381.5 

888.5 

402.0 

852.8 

43.5 

4,174.1 

11,655.3 

21.5 

13.7 

7.0 

0.7 

0.0 

0.0 

57.4 

78.9 

1. GDP data are based on the NIPA values from the July 2005 annual revision. GDP Gross domestic product 
23

Appendix B 

NAICS Industries for Which Gross Domestic Product by State Estimates are Available from 1997 to 2005 

1997 NAICS code 1997 NAICS code 

Private industries ....................................................... 

Agriculture, forestry, fishing, and hunting ............ Crop and animal production ................................... Forestry, fishing, and related activities.................... 

Mining ....................................................................... Oil and gas extraction ............................................. Mining, except oil and gas ...................................... Support activities for mining ................................... 

Utilities...................................................................... 

Construction ............................................................ 

Manufacturing.......................................................... 

Durable goods ........................................................ 

Wood product manufacturing............................... 

Nonmetallic mineral product manufacturing......... 

Primary metal manufacturing............................... 

Fabricated metal product manufacturing ............. Machinery manufacturing .................................... Computer and electronic product manufacturing 

Electrical equipment and appliance 

manufacturing ...................................................... Motor vehicle, body, trailer, and parts 

manufacturing ...................................................... Other transportation equipment manufacturing ... Furniture and related product manufacturing....... Miscellaneous manufacturing .............................. 

Nondurable goods .................................................. 

Food product manufacturing ................................ 

Textile and textile product mills ............................ 

Apparel manufacturing......................................... 

Paper manufacturing............................................ 

Printing and related support activities.................. 

Petroleum and coal products manufacturing ....... 

Chemical manufacturing ...................................... 

Plastics and rubber products manufacturing ....... 

Wholesale trade ....................................................... 

Retail trade ............................................................... 

Transportation and warehousing, excluding 

Postal Service .......................................................... 

Air transportation .................................................... 

Rail transportation .................................................. 

Water transportation ............................................... 

Truck transportation ................................................ 

Transit and ground passenger transportation ......... 

Pipeline transportation............................................ 

Other transportation and support activities............. 

Warehousing and storage....................................... 

........................................ 

11 

111–112 

113–115 

21 

211 

212 

213 

22 

23 

31–33 

........................................ 

321 

327 

331 

332 

333 

334 

335 

3361–3363 

3364, 3365, 3366, 3369 

337 

339 

........................................ 

311–312 

313–314 

315–316 

322 

323 

324 

325 

326 

42 

44–45 

48–49 

481 

482 

483 

484 

485 

486 

487, 488, 492 

493 

Information ................................................................. 

Publishing including software.................................... 

Motion picture and sound recording industries ......... 

Broadcasting and telecommunications ..................... 

Information and data processing services ................ 

Finance and insurance .............................................. Federal Reserve banks, credit intermediation and 

related services......................................................... Securities, commodity contracts, investments .......... Insurance carriers and related activities ................... Funds, trusts, and other financial vehicles ................ 

Real estate, rental, and leasing ................................ 

Real estate................................................................ 

Rental and leasing services and lessors of intangible 

assets........................................................................ 

Professional and technical services ........................ 

Legal services ........................................................... 

Computer systems design and related services ....... 

Other professional, scientific and technical services 

Management of companies and enterprises ........... 

Administrative and waste services .......................... 

Administrative and support services ......................... 

Waste management and remediation services ......... 

Educational services ................................................. 

Health care and social assistance............................ 

Ambulatory health care services............................... 

Hospitals and nursing and residential care facilities 

Social assistance ...................................................... 

Arts, entertainment, and recreation ......................... Performing arts, museums, and related activities ..... 

Amusements, gambling, and recreation.................... 

Accommodation and food services ......................... 

Accommodation ........................................................ Food services and drinking places............................ 

Other services, except government ......................... 

Government................................................................ 

Federal civilian .......................................................... 

Federal military.......................................................... 

State and local .......................................................... 

51 

511 

512 

513 

514 

52 

521–522 

523 

524 

525 

53 

531 

532–533 

54 

5411 

5415 

5412–5414, 5416–5419 

55 

56 

561 

562 

61 

62 

621 

622–623 

624 

71 

711–712 

713 

72 

721 

722 

81 

92 

........................................ 

........................................ 

........................................ 

Source: Executive Office of the President, Office of Management and Budget, North American Industry Classification System Manual 1997 (Washington, DC: U.S. Government Printing Office, 1997). 
24

Appendix C 

SIC Industries for Which Gross Domestic Product by State Estimates are Available from 1963 to 1997 

1987 SIC code 1987 SIC code 

Private industries.................................................. 

Agriculture, forestry, and fishing ..................... 

Farms................................................................ 

Agricultural services, forestry, and fishing......... 

Mining ................................................................. 

Metal mining ..................................................... 

Coal mining....................................................... 

Oil and gas extraction ....................................... 

Nonmetallic minerals, except fuels ................... 

Construction ...................................................... 

Manufacturing .................................................... 

Durable goods................................................... 

Lumber and wood products ........................... 

Furniture and fixtures..................................... 

Stone, clay, and glass products...................... 

Primary metal industries ................................ 

Fabricated metal products ............................. 

Industrial machinery and equipment.............. 

Electronic and other electric equipment......... 

Motor vehicles and equipment ....................... 

Other transportation equipment ..................... 

Instruments and related products .................. 

Miscellaneous manufacturing industries........ 

Nondurable goods............................................. 

Food and kindred products ............................ 

Tobacco products........................................... 

Textile mill products........................................ 

Apparel and other textile products ................. 

Paper and allied products .............................. 

Printing and publishing................................... 

Chemicals and allied products....................... 

Petroleum and coal products ......................... 

Rubber and miscellaneous plastics products. 

Leather and leather products......................... 

.................................... 

A 

01–02 

07–09 

B 

10 

12 

13 

14 

C 

D 

.................................. 

24 

25 

32 

33 

34 

35 

36 

371 

372–79 

38 

39 

.................................. 

20 

21 

22 

23 

26 

27 

28 

29 

30 

31 

Transportation and public utilities................... 

Transportation................................................... 

Railroad transportation .................................. 

Local and interurban passenger transit ......... 

Trucking and warehousing ............................. 

Water transportation ...................................... 

Transportation by air ...................................... 

Pipelines, except natural gas......................... 

Transportation services.................................. 

Communications ............................................... 

Electric, gas, and sanitary services .................. 

Wholesale trade ................................................. 

Retail trade ......................................................... 

Finance, insurance, and real estate................. Depository institutions ...................................... Nondepository institutions ................................ 

Security and commodity brokers ...................... 

Insurance carriers............................................. 

Insurance agents, brokers, and service............ 

Real estate ....................................................... Holding and other investment offices................ 

Services.............................................................. 

Hotels and other lodging places ....................... 

Personal services ............................................. 

Business services............................................. 

Auto repair, services, and parking .................... 

Miscellaneous repair services .......................... 

Motion pictures ................................................. 

Amusement and recreation services ................ 

Health services................................................. 

Legal services................................................... 

Educational services......................................... 

Social services.................................................. 

Membership organizations ............................... 

Other services .................................................. 

Private households ........................................... 

Government ....................................................... 

Federal civilian.................................................. 

Federal military ................................................. 

State and local.................................................. 

E 

..................................... 

40 

41 

42 

44 

45 

46 

47 

48 

49 

F 

G 

H 

60 

61 

62 

63 

64 

65 

67 

I 

70 

72 

73 

75 

76 

78 

79 

80 

81 

82 

83 

86 

84,87,89 

88 

J 

91–96 

97 

91–96 

Source: Executive Office of the President, Office of Management and Budget, Standard Industrial Classification Manual 1987 (Washington, DC: U.S. Government Printing Office, 1987). 
25 

Appendix D 

Major Sources of State Data for the Estimates of Taxes on Production and Imports by Industry—Continues 

Product/activity taxed Major source of data Industry affected 

Federal excise taxes: 

Imported products Collections of customs duties by port from 

Department of Treasury 

Wholesale trade, food product manufacturing 

Coal mining Production of coal from DOE Mining, except oil and gas 

Alcoholic beverages Wage and salary disbursements for employees 

covered by unemployment insurance from BLS 

Food product manufacturing 

Tobacco Wage and salary disbursements for employees 

covered by unemployment insurance from BLS 

Food product manufacturing 

Transportation of persons and property by air Passenger and freight enplanements by air from 

DOT 

Air transportation 

Chemicals and vaccines Wage and salary disbursements for employees 

covered by unemployment insurance from BLS 

Chemical manufacturing 

Firearms transfer Personal income from BEA Retail trade 

Sport fishing equipment, bows, and arrows Wage and salary disbursements for employees 

covered by unemployment insurance from BLS 

Miscellaneous manufacturing 

Telephone and teletypewriter services Wage and salary disbursements for employees 

covered by unemployment insurance from BLS 

Broadcasting and telecommunications 

Electric detection / sonar devices Wage and salary disbursements for employees 

covered by unemployment insurance from BLS 

Computer and electronic product manufacturing 

Petroleum Refinery inputs of crude oil Petroleum and coal products manufacturing 

Tires Wage and salary disbursements for employees 

covered by unemployment insurance from BLS 

Plastics and rubber products manufacturing 

Nuclear waste disposal Generation of nuclear power from DOE Utilities 

Heavy-duty trucks Payments into highway trust fund attributable to 

highway users from DOT 

Wholesale trade 

Highway use by heavy vehicles Payments into highway trust fund attributable to 

highway users from DOT 

Truck transportation, wholesale trade, and retail 

trade 

Alcohol license Personal income from BEA Retail trade 

Diesel and special motor fuels Payments into highway trust fund attributable to 

highway users from DOT 

Wholesale trade 

Luxury retail Personal income from BEA Retail trade 

Chemical and vaccines Wage and salary disbursements for employees 

covered by unemployment insurance from BLS 

Chemical manufacturing 

Aviation fuel (commercial and noncommercial) 

and gasoline used in noncommercial aviation 

Consumption of aviation gas fuel and nongas 

fuel from DOE 

Wholesale trade 

Firearms and ammunition Wage and salary disbursements for employees 

covered by unemployment insurance from BLS 

Fabricated metal product manufacturing 

Electric outboard motors and devices Wage and salary disbursements for employees 

covered by unemployment insurance from BLS 

Machinery manufacturing 

Fuel used commercially on inland waterways Wage and salary disbursements for employees 

covered by unemployment insurance from BLS 

Water transportation 

“Gas guzzlers” Wage and salary disbursements for employees 

covered by unemployment insurance from BLS 

Wholesale trade 

Policies issued by foreign insurers Unpublished estimates of wage and salary 

accruals from BEA 

Insurance carriers and related activities 

Wagering Wage and salary disbursements for employees 

covered by unemployment insurance from BLS 

Amusements, gambling, and recreation 

BEA Bureau of Economic Analysis DOE U.S. Department of Energy 

BLS Bureau of Labor Statistics DOT U.S. Department of Transportation 
26 GDP by State Estimation Methodology 

Major Sources of State Data for the Estimates of Taxes on Production and Imports by Industry—Table Ends 

Product/activity taxed Major source of data Industry affected 

State and local taxes: 

Amusement license and sales tax Employee compensation from BEA Amusements, gambling, and recreation; motion 

picture and sound recording industries 

Building permits Building permits from Census Bureau Construction 

Documentary and stock transfer Census Bureau tabulations by state and industry Securities, commodity contracts, investments; 

real estate; legal services 

Franchise Employee compensation from BEA All industries except crop and animal product 

(“farms”), social assistance, and government 

General sales tax Sales tax receipts by industry All industries except crop and animal production 

(“farms”), and federal government 

Hunting and fishing license Census Bureau tabulations by state Forestry, fishing, and related activities 

Insurance Census Bureau tabulations by state Insurance carriers and related activities 

Alcohol license Employee compensation from BEA Food product manufacturing; wholesale trade; 

and retail trade 

Alcohol sales Census Bureau tabulations by state Food product manufacturing; wholesale trade; 

and retail trade 

Motor fuel sales Census Bureau tabulations by state Wholesale trade 

Motor vehicle license BEA tabulations for farms; Census Bureau 

tabulations for all other industries 

All industries except government 

Severance Census Bureau tabulations by state Forestry, fishing and related activities; oil and 

gas extraction; mining, except oil and gas; and 

utilities 

Occupational and business license Census Bureau tabulations by state All industries except crop and animal production 

(“farms”), and government 

Other TOPI Employee compensation from BEA All industries except crop and animal production 

(“farms”), and government 

Parimutuel Census Bureau tabulations by state Amusements, gambling, and recreation 

Tobacco Census Bureau tabulations by state Food product manufacturing 

Public utility license Employee compensation from BEA Utilities, transportation and warehousing, and 

broadcasting and telecommunications 

Public utility sales Census Bureau tabulations by state Utilities, transportation and warehousing, and 

broadcasting and telecommunications 

Other selective sales Census Bureau tabulations by state All industries except crop and animal production 

(“farms”), and government 

Property Employee compensation from BEA All industries except crop and animal production 

(“farms”), and government 

Special assessments Special assessments from Census Bureau Real estate 

BEA Bureau of Economic Analysis DOE U.S. Department of Energy 

BLS Bureau of Labor Statistics DOT U.S. Department of Transportation 
27 

Appendix E 

Major Sources of State Data for the Estimates of Gross Domestic Product by State and Industry—Continues 

Industry Benchmark years Nonbenchmark years 

Agriculture, forestry, fishing, and hunting: 

Crop and animal production (“farms”) Farm income and expenses from USDA Same as benchmark 

Forestry, fishing, and related activities Wage and salaries from BEA Same as benchmark 

Mining Value added and payrolls from census of mineral 

industries 

Interpolated or extrapolated using value of production 

from DOE and USGS 

Utilities Income and expenses by company and generating 

capacity by operating plant for electric utilities from 

FERC and EIA, respectively; receipts, exports, and 

deliveries to consumers of natural gas by gas utilities 

from EIA; wage and salaries for sanitary service from 

BEA; company financial data from Statistics of 

Income, IRS 

Same as benchmark 

Construction Value added and payrolls from census of construction 

industries 

Interpolated or extrapolated using earnings from BEA 

Manufacturing Value added and payrolls from census of 

manufactures 

Value added and payrolls from annual survey of 

manufactures 

Wholesale trade Revenues and payrolls from census of wholesale and 

retail trade 

Interpolated or extrapolated using wages and salaries 

from BEA 

Retail trade Revenues and payrolls from census of wholesale and 

retail trade 

Interpolated or extrapolated using wages and salaries 

from BEA 

Transportation and warehousing, excluding Postal Service: 

Air transportation Income and expenses by company and passenger 

enplanements from DOT 

Same as benchmark 

Rail transportation For Class I and Class II railroads as a group, revenue 

ton-miles, and revenues and expenses from DOT; 

revenues, expenses and passenger boardings from 

Amtrak 

Same as benchmark 

Water transportation Revenues and payrolls from census of transportation, 

communications, and utilities 

Interpolated or extrapolated using wages and salaries 

from BEA 

Truck transportation Revenues and payrolls from census of transportation, 

communications, and utilities 

Interpolated or extrapolated using wages and salaries 

from BEA 

Transit and ground passenger transportation Revenues and payrolls from census of transportation Interpolated or extrapolated using wages and salaries 

from BEA 

Pipeline transportation Census data and state government data on revenue Interpolated or extrapolated using wages and salaries 

from BEA 

Other transportation and support activities Revenues and payrolls from census of transportation Interpolated or extrapolated using wages and salaries 

from BEA 

Information Sales and payrolls from census of service industries Interpolated or extrapolated using wages and salaries 

from BEA 

Finance and insurance: 

Federal Reserve banks, credit intermediation and 

related services 

Income and expenses from FDIC, FRB, OTS, and 

FHLBB 

Same as benchmark 

Securities, commodity contracts, investments Revenues and payrolls from census of finance, insurance, and real estate Interpolated or extrapolated using wages and salaries 

from BEA 

Insurance carriers and related activities Premiums paid and losses incurred by type of 

insurance and state from the National Association of 

Insurance Commissioners 

Same as benchmark 

Funds, trusts, and other financial activities Wages and salaries from BEA Same as benchmark 

See the abbreviations defined at the end of the table. 
28 GDP by State Estimation Methodology 

Major Sources of State Data for the Estimates of Gross Domestic Product by State and Industry—Table Ends 

Industry Benchmark years Nonbenchmark years 

Real estate, rental, and leasing: 

Real estate For 1990 and 2000, number and value of owneroccupied dwellings and number and rental value of 

renter-occupied dwellings from census of housing; 

Imputed rent from BEA; nonfarm personal income 

from BEA 

Interpolated or extrapolated using nonfarm personal 

income from BEA 

Rental and leasing services and lessors of intangible 

assets 

Revenues and payrolls from census of finance, 

insurance, and real estate 

Interpolated or extrapolated using wages and salaries 

from BEA 

Professional and technical services Sales and payrolls from census of service industries Interpolated or extrapolated using wages and salaries 

from BEA 

Management of companies and enterprises Sales and payrolls from census of service industries Interpolated or extrapolated using wages and salaries 

from BEA 

Administrative and waste services Sales and payrolls from census of service industries Interpolated or extrapolated using wages and salaries 

from BEA 

Educational services Sales and payrolls from census of service industries Interpolated or extrapolated using wages and salaries 

from BEA 

Health care and social assistance Sales and payrolls from census of service industries Interpolated or extrapolated using wages and salaries 

from BEA 

Arts, entertainment, and recreation Sales and payrolls from census of service industries Interpolated or extrapolated using wages and salaries 

from BEA 

Accommodation and food services Sales and payrolls from census of service industries Interpolated or extrapolated using wages and salaries 

from BEA 

Other services, except government Sales and payrolls from census of service industries Interpolated or extrapolated using wages and salaries 

from BEA 

Government: 

Federal civilian Federal civilian employment from BLS; Generating 

capacity of Federal Power authorities; postal service 

revenues from USPS; volume of FHA mortgage 

insurance from HUD; premiums and indemnities of 

the Federal Crop Insurance Corporation from USDA; 

premiums received and amounts paid for losses by 

National Flood Insurance Program from FEMA; 

income and expenses of Federal Reserve banks from 

FRB; uranium sales from USEC; canteen sales from 

DVA 

Same as benchmark 

Federal military Federal military employment from BLS Same as benchmark 

State and local Revenues and expenses for 15 types of enterprises 

from Census Bureau; state and local government 

employment from BLS 

Same as benchmark 

BEA Bureau of Economic Analysis FDIC Federal Deposit Insurance Corporation OTS Office of Thrift Supervision 

BLS Bureau of Labor Statistics FEMA Federal Emergency Management Agency USDA U.S. Department of Agriculture 

DOD U.S. Department of Defense FHA Federal Housing Administration USEC U.S. Enrichment Corporation 

DOE U.S. Department of Energy FHLBB Federal Home Loan Bank Board USGS U.S. Geological Survey 

DOT U.S. Department of Transportation FRB Federal Reserve Board USPS U.S. Postal Service 

DVA U.S. Department of Veterans Affairs HUD U.S. Department of Housing and Urban Development 

EIA Energy Information Administration IRS Internal Revenue Service 
29

Appendix F 

Major Sources of State Data for the Estimates of Nontax Payments to Government 

Product/activity taxed Major source of data Industry affected 

Grazing fees Grazing receipts from Federal lands from DOI Crop and animal production (“farms”) 

Onshore and offshore mining rents and royalties Federal rents and royalties From DOI Oil and gas extraction 

Miscellaneous rents and royalties Wages and salaries from BEA Real estate 

Federal Reserve banking (assessments) Assessments on Federal Reserve Banks from FRB Federal Reserve banks, credit intermediation and 

related services 

BEA Bureau of Economic Analysis 

DOI U.S. Department of the Interior 

FRB Federal Reserve Board 
30 

Frequently Asked Questions


1. When analyzing regional performance, should I 

use nominal or real chained-dollar GDP by state? 

Comparisons of GDP by state chained-dollar 

growth rates and nominal dollar shares of GDP by 

state across industries or states and regions provide indications of the relative performance of industries, 

states, and regions. For example, comparing the 

growth rate of chained-dollar GDP by state for an industry to the growth rate of total chained-dollar GDP 

by state indicates whether that industry is raising or 

lowering the state’s growth rate. Comparing the share 

of total GDP by state in nominal dollars that is accounted for by the GDP by state of an industry over 

time indicates whether that industry’s claim on the 

state’s resources is increasing or decreasing. 

2. How can I compute chained dollar values for 

years 1977–1989? 

We publish a full time series (1977–1997) of chainweighted quantity indexes. These indexes can be used 

to reconstruct the complete time series of real GDP by 

state. The annual percent change in the quantity index 

series is equal to the annual percent change in the real 

dollar GDP by state series for a given industry and 

state. So the real GDP by state values can be extrapolated using the annual growth rate in the quantity index series. 

3. How do I compute industry contributions to 

changes in real GDP by state? 

BEA recommends using estimates of real economic 

growth that are based on chain-type quantity indexes 

or chained dollars. The method for computing contributions to growth is discussed in the article “A Preview 

of the 1999 Comprehensive Revision of the national 

income and product Accounts: Statistical Changes,” in 

the October 1999 SURVEY OF CURRENT BUSINESS. This formula eliminates problems with the non-additivity of 

component industries to total product (GDP or GDP 

by state) when valued in chained dollars. An individual 

industry’s contribution to the percent change in total 

chained-dollar product is given by: 

((pi t ⁄ Pt

F

) + pi t , – 1) ×( , – , – 1) ,	 qi t qi t Co

oΔi t =100 × ---------------------------------------------------------------------------------------- , Σ 

j

(( ⁄ F) + pj t ) ×qj t – 1 , pj t , Pt , – 1 , 

where F is the Fisher price index for the ag- Pt gregate in period t relative to period 

t–1. 

is the price of component i in period 

Pi t, t; and 

is the quantity of component i in 

qi t, period t. 

For additional discussion of the issues involved in 

analyzing real economic growth based on chain-type 

quantity indexes or chained dollars measures, refer to 

the box, “Using Chained Dollar Estimates for Computing Contributions to Economic Growth: A Cautionary 

Note,” in: Lum, Sherlene K. S. and Brian C. Moyer, 

“Gross Product by Industry, 1995–97,” SURVEY OF CURRENT BUSINESS 78 (November 1998): 20–40. 

4. How and when will the economic effects of Hurricane Katrina be reflected in BEA’s regional 

income and product accounts? 

●� How is State Personal Income affected by natural


disasters such as Katrina?


Natural disasters like Hurricane Katrina have two 

types of major effects on state personal income: they 

destroy property, and they disrupt the flow of income 

in the economy: typically reducing it in the short term 

and boosting it later. BEA’s estimates reflect both types 

of effects. 

Disruptions to the flow of income are generally embedded in the data on which the estimates are based. 

The impact of the natural disaster on personal income 

growth cannot be distinguished separately, however, 

because the source data record actual activity and do 

not attempt to separately identify the effects of the disaster. Nonetheless, in the short run, compensation in 
GDP by State Estimation Methodology 31 

many industries is likely to decline in areas directly hit 

by the hurricane because of a decline in production, 

while in some industries involved in the cleanup and 

repair (construction and health care and social assistance) compensation may increase. Similarly, compensation could increase in areas that are the recipients of 

evacuees, both from the increased activity to support 

these evacuees (e.g. doctors moving into the area) and 

to the extent that the evacuees themselves might find 

employment. 

Estimates of property losses and of the associated 

insurance claims are incorporated as one-time effects: 

They increase both the consumption of fixed capital 

and business transfer payments. Damage to the property of household enterprises affects proprietors’ income and rental income. They are reduced by the 

amount of uninsured losses measured by consumption 

of fixed capital less business transfer payments. Damage to consumer durable goods affects only personal 

current transfer receipts which are increased by the 

amount of the insured losses for these goods. 

A table that identifies the impacts of the 2005 hurricanes is available at BEA’s Web site, <www.bea.gov>. 

●� How is Gross Domestic Product by state affected by 

natural disasters such as Katrina? 

GDP by state is a measure of a state’s current production of goods and services and it will reflect any 

disruption in that production. It is not directly affected 

by the loss of property (structures and equipment) 

produced in previous periods. GDP by state may be affected indirectly by the actions taken by consumers, 

businesses, and governments in response to disruptions in production or to the loss of property, but these 

responses are not amenable to precise quantification; 

moreover, the responses may be spread out over a long 

period of time. For example, rebuilding activity, which 

may occur over many months following a disaster, will 

typically be reflected in the regular source data used to 

estimate residential and nonresidential construction. 

There is no way to separate the disaster-related rebuilding from other construction activity. 

Tourism and other types of consumer spending may 

be canceled or postponed in the face of a disaster; 

whether canceled or merely postponed, the effects will 

be embedded in the source data that are used to estimate GDP by state. 

●� When will the economic effects of Hurricane Katrina be reflected in the State Personal Income estimates? 

The estimates of personal income for the third quarter of 2005 were released December 20, 2005, and reflect the effects of Hurricane Katrina. This storm 

caused extensive damage, particularly in Louisiana, 

Mississippi, Alabama, and Florida; as a result, several 

components of state personal income could be affected. 

Rental income of persons and proprietors’ income 

will be reduced to the extent that there are uninsured 

losses of property owned by household enterprises. 

Business payments to persons, a component of personal current transfer receipts, will increase for the 

quarter, to the extent that there are net insurance settlements for damage to consumer durable goods. 

Other effects of the hurricanes are embedded in 

BEA’s source data and will not be identifiable, so BEA 

will not attempt to quantify them. However, employment statistics from the affected states—primarily 

Louisiana and Mississippi—may not be able to report 

employment accurately due to the significant disruption to the businesses in the affected areas. This is an 

area BEA will watch carefully. 

●�When will the economic effects of Hurricane Katrina be reflected in the GDP by state estimates? 

Because Hurricane Katrina struck the states surrounding the Gulf of Mexico in late August, 2005, the 

prototype accelerated GDP by state estimates for 2005 

that were released on June 6, 2006, reflect the initial 

economic impacts of the hurricane. Since the impacts 

of Hurricane Katrina were so extensive, and the rebuilding of the infrastructure in the Gulf states may 

span many months, the GDP by state estimates for future years may also reflect economic impacts of the 

hurricane on these states. 

●�Can RIMS multipliers be used to estimate the economic impacts of hurricanes and natural disasters 

such as Katrina? 

In general, yes. In fact, RIMS was used to analyze 

the economic impacts of Hurricanes Andrew in 1992 

and Charley in 2004, which, while devastating to those 

regions’ residents, were not as catastrophic as Katrina. 

However, use RIMS multipliers for analyzing the impacts of natural disasters with care. Natural disasters 

can cause substantial changes to the structure of the local economy. 

In the case of the New Orleans metropolitan area, as 

we now know, there was severe damage and flooding of 

residences and businesses in many parts of the area, 

and mandatory evacuation has been ordered for the 

entire city. Such a dramatic alteration of the structure 

of a local economy makes using multipliers from regional input-output models like RIMS highly problematic. Regional multipliers reflect the industry 

linkages in a local economy at a given time, and so are 

best used to study less catastrophic events where those 
32 GDP by State Estimation Methodology 

linkages are for the most part preserved. 

See the RIMS User Handbook for more details on 

what factors need to be taken into account when 

using RIMS multipliers: <http://www.bea.gov/bea/ 

ARTICLES/REGIONAL/PERSINC/Meth/rims2.pdf>. 

In the case of other local areas in the Gulf Coast region, RIMS multipliers can be used to estimate the 

economic impacts of Katrina, as long as the damage 

did not result in major changes to the structure of the 

local economy. For example, if tourism declines because Katrina damaged some, but not all, of the casinos or hotels in the Gulfport-Biloxi area, then RIMS 

can be used to estimate the impact on the area of the 

decline in tourism. Similarly, if some of the manufacturing or other firms in the area were forced to close 

due to Katrina, RIMS multipliers could be used. For 

more details, please refer to the RIMS documentation 

on BEA’s web site: <http://www.bea.gov/bea/regional/

rims/>. 

● How large is the region in the total U.S. economy? 

Louisiana’s gross domestic product is about 1.2 percent of U.S. GDP, but the state ranks first in the U.S. in 

terms of specialization in water transportation and 

third (behind Alaska and Wyoming) in terms of 

specialization in oil and gas extraction. While the New 

Orleans-Metairie-Kenner Metropolitan Statistical Area 

(MSA) only accounts for about 0.4 percent of U.S. personal income, the MSA accounts for over one-third of 

Louisiana’s personal income. 

Mississippi’s gross domestic product is about 0.7 

percent of U.S. GDP. Together, the Gulfport-Biloxi and 

Pascagoula MSAs account for 15 percent of Mississippi’s personal income. 

Alabama’s gross domestic product is about 1.2 percent of U.S. GDP. The Mobile, Alabama MSA accounts 

for about 8 percent of Alabama’s personal income. 

●�How can I obtain further information about BEA’s 

regional income and product accounts? 

For state personal income, go to BEA’s Web site at 

<http://www.bea.gov/bea/regional/statelocal.htm>. 

For gross domestic product by state, go to BEA’s 

Web site at <http://www.bea.gov/bea/regional/

gsp.htm>. 

For RIMS multipliers, go to BEA’s Web site at 

<http://www.bea.gov/bea/regional/rims/>. 

5. Where can I obtain quarterly GDP by state data? 

The gross domestic product (GDP) by state data series published by BEA contains annual estimates only. 

We do not estimate or publish quarterly GDP by state. 

6. Why is GDP by state per employee so large for 

finance, insurance, and real estate, relative to the 

other industries? 

This is due, in large part, to the real estate industry 

which includes an imputation for the rental value of 

owner-occupied housing. BEA treats homeowners as 

businesses, which pay rent to themselves. Therefore, 

homeowners contribute to the real estate industry’s 

GDP by state even if they are not employed by the industry. In addition, like businesses, homeowners’ 

property taxes paid to state and local governments are 

included as part of real estate TOPI. 

7. Why does the sum-of-states nominal dollar GDP 

by state not equal nominal dollar GDP? 

GDP by state excludes the wages and salaries and 

wage and salary supplements of Federal civilian and 

military personnel stationed abroad. GDP by state also 

excludes the capital consumption allowances associated with Federal government equipment and structures located abroad, and all military weaponry. 

8. Are GDP by state data available for counties and 

metropolitan areas? 

BEA neither estimates nor publishes gross product 

data for any geographical units below the state level at 

this time. 

9. How can GDP by state be negative? 

GDP by state is estimated as the sum of three components: 

● Compensation of employees, 

● Taxes on production and imports (TOPI), and 

● Gross operating surplus. 

Gross operating surplus includes the losses of corporations, proprietors’ losses, and government subsidies—subsidies are subtracted from gross operating 

surplus. Consequently, gross operating surplus for an 

industry may be negative. When gross operating surplus is added to the industry’s compensation and 

TOPI, the sum, GDP by state, may be negative. 

10. Why do BEA’s measures of value added differ 

from the Census measures for some industries? 

For the nation, BEA defines gross domestic product 

by industry, often referred to as “value added,” as an 

industry’s 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). The Census Bureau’s measure of value 

added by industry differs conceptually from BEA’s by 
GDP by State Estimation Methodology 33 

including the purchased services that are used in 

production of an industry’s product, excluding excise 

and sales taxes from gross receipts, and not valuing inventories on a replacement cost basis. 

For the states, further differences between the BEA 

measure of GDP by state and the Census value added 

measure arise because 1) for SIC industries, BEA assigns the value added by central administrative offices 

(CAOs) of multi-establishment firms to the states 

where the CAOs are located while Census assigns it to 

the states where the operating establishments administered by the CAOs are located; 2) there may be industry classification differences between the two series; 

and 3) for construction, BEA assigns GDP by state to 

the state where the construction is performed rather 

than to the state where the construction establishment 

is located. 

11. How can the GDP by industry or GDP by state 

chained-weighted quantity indexes be re-based? 

A quantity index measures the level of quantity produced, assuming the price does not change due to inflation or deflation. An advantage of chain-type 

quantity indexes is that they can easily be re-based to a 

new base year because these indexes are not subject to 

bias depending on the base year selected. To re-base 

the quantity index series, simply divide every quantity 

index value in the series by the quantity index value of 

the desired new base year. This procedure sets the value 

for the new base year equal to 1.0, and all other indexes 

in the series are re-based to that new base year. To convert to the usual index number format, multiply all 

numbers in the series by 100. 

12. Where can I get more information about BEA’s 

products relating to GDP by state? 

For further information on the GDP by state estimates, call the GDP by state staff at: (202) 606–5340 

or call a GDP Industry analyst directly or e-mail 

<gdpbystate@bea.gov>. 

13. What are taxes on production and imports 

(TOPI)? 

Taxes on production and imports (TOPI) consist of 

tax liabilities, such as general sales and property taxes, 

that are chargeable to business expense in the calculation of profit-type incomes. Special assessments are 

also included. 

TOPI is the sum of state and local TOPI, which is 

primarily nonpersonal property taxes, licenses, and 

sales and gross receipts taxes, and Federal TOPI, which 

is composed of excise taxes on goods and services. 

14. Why are the quantity indexes equal to zero for 

some industries even though they do have GDP by 

state? 

If the base year (2000) nominal GDP by state value 

is zero, the quantity indexes for the entire time series 

are incomputable because their values are mathematically undefined, even if GDP by state is nonzero for 

years other than the base year. In these cases the quantity indexes have been set equal to zero, even though 

their values are technically undefined. 

15. What is the difference between company data 

and establishment data? 

The headquarter offices of multi-establishment 

companies may be located in a state other than the 

state(s) where the operating establishments are located. For most industries and GDP by state components, the estimates are based on establishment data by 

state which are used directly. For selected industries—railroad transportation, transportation by air, 

and electric utilities, the estimates of other capital 

charges are based on tabulations of company net income and expenses. The company tabulations are allocated to the states in which the company has 

operating establishments based on indicators of capital stock or its use—for example, electric generating 

capacity. 

16. What does the residual term “not allocated by 

industry” mean? 

The nonadditivity of the chained (2000) dollars is 

reflected in a residual “not allocated by industry,” 

which is calculated as total real (chained 2000 dollars) 

GDP by state minus the sum of the real GDP by state 

for the detailed industries. 
34 

Suggested Reading 

“Experimental Estimates of Gross State Product by Industry,” Bureau of Economic Analysis Staff Paper 42, May 1985: Superintendent of Documents, U. S. Government Printing Office, Washington, D.C. 

20402. 

Aman, Gerard P., George K. Downey, and Sharon D. Panek, “Comprehensive Revision of Gross State 

Product: Accelerated Estimates for 2003, Revised Estimates for 1977–2002,” SURVEY OF CURRENT BUSINESS 

85 (January 2005): 80–106. 

Fixler, Dennis J., Marshall B. Reinsdorf, and George M. Smith, “Measuring the Services of Commercial Banks in the NIPAs,” SURVEY OF CURRENT BUSINESS 83 (September 2003): 33–44. 

Kendrick, John W. and C. Milton Jaycox, “The Concept and Estimation of Gross State Product.” The 

Southern Economic Journal 32 (October 1965): 153–168. 

Landefeld, J. Steven and Bruce T. Grimm, “A Note on the Impact of Hedonics and Computers on Real 

GDP,” SURVEY OF CURRENT BUSINESS 80 (December 2000): 17–22. 

Landefeld, J. Steven and Robert P. Parker, “BEA’s Chain Indexes, Time Series, and Measures of LongTerm Economic Growth,” SURVEY OF CURRENT BUSINESS 77 (May 1997): 58–68. 

Lawson, Ann M., Kurt S. Bersani, Mahnaz Fahim-Nader, and Jiemin Guo, “Benchmark Input-Output 

Accounts of the United States, 1997,” SURVEY OF CURRENT BUSINESS 82 (December 2002): 19–109. 

Lenze, David G., “State Personal Income: Second Quarter of 2004 and Revised Estimates for 

2001–2004:I,” SURVEY OF CURRENT BUSINESS 84 (October 2004): 109–159. 

Lenze, David G., “State Personal Income: Second Quarter of 2005 and Revised Estimates for 

2002–2005:I,” SURVEY OF CURRENT BUSINESS 85 (October 2005): 111–160. 

Moulton, Brent R. and Eugene P. Seskin, “A Preview of the 1999 Comprehensive Revision of the National Income and Product Accounts: Statistical Changes,” SURVEY OF CURRENT BUSINESS 79 (October 

1999): 6–17. 

Moulton, Brent R. and Eugene P. Seskin, “A Preview of the 2003 Comprehensive Revision of the National Income and Product Accounts: Changes in Definitions and Classifications,” SURVEY OF CURRENT 

BUSINESS 83 (June 2003): 17–34. 

Moyer Brian C., Mark A. Planting, Paul V. Kern, and Abigail M. Kish, “Improved Annual Industry Accounts for 1998–2003: Integrated Annual Input-Output Accounts and Gross-Domestic-Product-by-Industry Accounts,” SURVEY OF CURRENT BUSINESS 84 (June 2004): 21–57. 

Parker, Robert P., “Note on Alternative Measures of Gross Product by Industry,” SURVEY OF CURRENT 

BUSINESS 77 (November 1997): 84–85. 

Parker, Robert P. and Eugene P. Seskin, “Annual Revision of the National Income and Product 

Accounts: The Statistical Discrepancy,” SURVEY OF CURRENT BUSINESS 77 (August 1997): 19. 

Renshaw, Vernon, Edward A. Trott, Jr., and Howard L. Friedenberg, “Gross State Product By Industry,” SURVEY OF CURRENT BUSINESS 68 (May 1988): 39–46. 

Smith, George M. and Sherlene K. S. Lum, “Annual Industry Accounts: Revised Estimates for 

2002–2004,” SURVEY OF CURRENT BUSINESS 85 (December 2005): 18–69. 
GDP by State Estimation Methodology 35 

Sporing, Jr, John, George K. Downey, and John R. Kort, “Further Integrating BEA’s Economic 

Accounts: Introducing Annual Input-Output Estimates into the Gross State Product by Industry Accounts,” BEA Working Paper WP2005–04, April 18, 2005. 

Triplett, Jack E., “Economic Theory and BEA’s Alternative Quantity and Price Indexes,” SURVEY OF 

CURRENT BUSINESS 72 (April 1992): 49–52. 

Woodruff III, Clifford H., Sharon D. Panek, and Eric C. Erickson, “Gross State Product: Advance Estimates for 2005 and Revised Estimates for 1998–2004,” SURVEY OF CURRENT BUSINESS 86 (July 2006): 

108–132. 

Young, Allan H., “Alternative Measures of Change in Real Output and Prices,” SURVEY OF CURRENT BUSINESS 72 (April 1992): 32–48. 

Young, Allan H., “An Introduction to National Economic Accounting,” SURVEY OF CURRENT BUSINESS 65 

(March 1985): 59–76. 
36 October 2006 

Glossary

Additive, additivity: A characteristic of a measurement series whereby the summed components 

equal the aggregate. 

Advance gross state product (GDP) by state: The first estimate of gross domestic product (GDP) by 

state. It is released six months after the end of the calendar year and is based on source data that are incomplete and subject to revision. 

Allocation procedures: Allocation procedures are used in the derivation of GDP by state estimates either because the data for the GDP by state components may not be available for the states or may not be 

as comprehensive or reliable as the national data. In these cases, the national estimate of a component is 

allocated to the states in proportion to the state shares of an economic (or allocating) data series that is 

related to the component that is being allocated. In some cases, it is necessary to ensure that an estimated GDP by state series matches a set of national controls for an industry or component, and all-industry/component control totals for the states. In these cases, a dual allocation procedure is used. In a 

dual allocation procedure the elements within a matrix are adjusted to simultaneously sum to known 

row and column totals, with national totals serving as the column totals and the state totals as the row totals. The allocating series is inserted in the matrix and serves as the initial element set. These initial elements are then adjusted alternately by allocation to sum first to the column totals and then to the row 

totals (a process sometimes referred to as rocking the matrix). If the row and column totals are mutually 

consistent, the matrix elements will converge to a solution that simultaneously satisfies both the row and 

the column constraints. 

Annual input-output (I-O) accounts: Set of I-O tables—make table, use table, direct requirements 

table, and total requirements tables—that are an update of the most recent benchmark I-O accounts. 

Annual tables are consistent with the gross domestic product (GDP)-by-industry accounts, but incorporate less comprehensive source data than those used for the benchmark I-O tables. 

Base period: The period from which the weights for a measurement series are derived. The national 

income and product accounts (NIPAs) currently use the year 2000 as the base period. 

Benchmark input-output (I-O) accounts: Statistical description of the production of goods and services and the transaction flows of goods and services between different producing sectors of the economy and to different components of final use. These accounts are presented in four tables: make table, 

use table, and two requirements tables. They are prepared primarily from economic census data and are 

presented at the 95- and 480-industry levels of detail. 

Benchmark survey: A census intended to cover the universe of potential survey respondents, in terms 

of the value of selected data items. The most comprehensive survey in terms of coverage and number of 

data items collected. Data collected in benchmark surveys are treated as “actual” values from which annual “estimates” are extrapolated (or interpolated) based on sample surveys in nonbenchmark years. 

Benchmark surveys generally occur every five years. 

Business current transfer payments (net): Net payments by businesses to persons, government, and 

the rest of the world for which no current services are performed. Related terms: business current transfer payments to persons (net), business current transfer payments to government (net), business current 

transfer payments to the rest of the world (net). 

Business sector: All corporate and noncorporate private entities organized for profit and certain 

other entities that are treated as businesses in the national income and product accounts (NIPAs), including mutual financial institutions, private noninsured pension funds, cooperatives, nonprofit organizations that primarily serve businesses, Federal Reserve banks, federally-sponsored credit agencies, and 

government enterprises. 
GDP by State Estimation Methodology 37 

Capital Consumption Adjustment (CCAdj): The difference between private tax-return-based capital 

consumption allowances for corporations and nonfarm proprietorships and capital consumption based 

on the use of uniform service lives, straight-line depreciation, and replacement cost. In the GDP by state 

estimates, the CCAdj must be removed from the GDP by state proprietors’ estimates because the CCAdj 

is not included in the GDP by industry proprietors’ estimates. Excluding the CCAdj from the state and 

national proprietors’ estimates may overstate proprietors’ costs and understate their profits. 

Capital consumption allowance (CCA), (private): Consists of tax-return-based depreciation charges 

for corporations and nonfarm proprietorships and of historical-cost depreciation (calculated by BEA) 

for farm proprietorships, rental income of persons, and nonprofit institutions. 

Capital expenditures: Expenditures made to acquire, add to, or improve property, plant, and equipment (PP&E). PP&E includes: land, timber, and minerals; structures, machinery, equipment, special 

tools, and other depreciable property; construction in progress; and tangible and intangible exploration 

and development costs. Changes in PP&E due to changes in entity—such as mergers, acquisitions, and 

divestitures—or to changes in accounting methods are excluded. 

Chained-dollar estimate: A measure to approximate the chain-type index level and is calculated by 

taking the current-dollar level of a series in the base period and multiplying it by the change in the chaintype quantity index number for the series since the base period. Chained-dollar estimates correctly show 

growth rates for a series, but are not additive in periods other than the base period. 

Chained-type index: Index that is based on the linking (chaining) of indexes to create a time series. 

Annual chain-type Fisher indices are used in BEA’s national income and product accounts (NIPAs) 

whereby Fisher ideal price indices are calculated using the weights of adjacent years. Those annual 

changes are then multiplied (chained) together, forming the chain-type index time series. 

Change in private inventories: The change in the physical volume of inventories owned by private 

business, valued at the average prices of the period. It differs from the change in the book value of inventories reported by many businesses; the difference is the inventory valuation adjustment (IVA). 

Compensation of employees: Gross domestic product by state compensation equals the sum of SPI 

wages and salaries (excluding other, net wages and salaries of persons employed by international organizations) adjusted for wage accruals less disbursements (WALD), plus SPI employer contributions for 

employee pension and insurance funds, plus employer contributions for social insurance, minus an 

overseas adjustment for federal civilian and military personnel stationed abroad. 

Consumption of fixed capital (CFC): The charge for the using up of private and government fixed 

capital located in the United States. It is the decline in the value of the stock of fixed assets due to wear 

and tear, obsolescence, accidental damage, and aging. For general government and for nonprofit institutions that primarily serve individuals, CFC is a measure of the value of the current services of the fixed 

assets owned and used by these entities. 

Control: An economic aggregate, usually a national total, to which state components are required to 

sum. 

Corporate Capital charges: One of four summary GDP by state income components, composed of 

corporate profits with inventory valuation adjustment (IVA), corporate capital consumption allowances 

(CCA), business transfer payments, net interest, rental income of persons, and subsidies less current surplus of government enterprises. 

Corporate profits with IVA and CCAdj: This measure—profits from current production—is the income that arises from current production, measured before income taxes, of organizations treated as 

corporations in the national income and product accounts (NIPAs). With several differences, this income is measured as receipts less expenses as defined in Federal tax law. Among these differences are: Receipts exclude capital gains and dividends received; expenses exclude bad debt, depletion, and capital 

losses; inventory withdrawals are valued at current cost; and depreciation is on a consistent accounting 

basis and valued at current replacement cost. 
38 GDP by State Estimation Methodology 

Current surplus of government enterprises: The current operating revenue and subsidies received by 

government enterprises from other levels of government less the current expenses of government enterprises. 

Current tax receipts: Tax revenues received by government from all sources. It is the sum of personal 

current taxes, taxes on production and imports and taxes on corporate income. 

Current-dollar estimate: The market value of an item. It reflects prices and quantities of the period 

being measured. 

Disclosure avoidance (D): BEA is legally required to safeguard the confidentiality of the information 

that it receives. When data cannot legally be displayed in a data table or file, a (D) appears denoting the 

suppression of a data cell because of disclosure considerations. In data files which require numeric values, the special numeric code 9999 is inserted to indicate a “D.” 

Disposable personal income: Total after-tax income received by persons; it is the income available to 

persons for spending or saving. 

Double deflation: Technique for estimating real value added by industry in the gross domestic product (GDP)-by-industry accounts. Under this procedure, an industry’s gross output and its intermediate 

inputs are deflated separately—hence, the term “double deflation.” Real value added is then estimated as 

the difference between deflated, or real, gross output and real intermediate inputs. 

Durable goods: Tangible products that can be stored or inventoried and that have an average life of at 

least three years. 

Employer contributions for employee pension and insurance funds: A component of both personal 

income and GDP by state that includes employer payments to private pension and profit-sharing plans, 

government employee retirement plans, private group health and life insurance plans, privately administered workers’ compensation plans, supplemental unemployment benefit plans, and several minor categories of employee compensation. It was formerly called “other labor income.” 

Employer contributions for social insurance (ECSI): Consist of employer payments under the following programs: old age, survivors, and disability insurance (Social Security), hospital insurance, unemployment insurance, railroad retirement, pension benefit guaranty, veterans’ life insurance, 

publicly-administered workers’ compensation, military insurance, and temporary disability insurance. 

Although these employer contributions to publicly-administered social insurance programs are treated 

as a cost of production, and are included in the calculation of GDP by state, they are not treated as part 

of income when accounting for personal income. Instead, the payments from the programs are counted 

as personal income when they are paid out to individuals. 

Enterprise: A business, service, or membership organization consisting of one or more establishments under common, direct or indirect, ownership or control. It is the highest level of establishment 

aggregation. An enterprise may vary in composition, ranging from a single-establishment company to a 

complex family of parent and subsidiary companies (firms under common ownership or control). 

Establishment: Business or industrial unit at a single geographic location that produces or distributes 

goods or performs services, for example, a single store or factory. 

Extrapolation: A method used to derive a first approximation to selected GDP by state components 

for the years that are beyond the latest (or earliest) benchmark year data, or which are beyond the range 

of a data series usually used as an allocation series for the component. Either a linear or growth rate procedure may be used, depending upon the component that is being extrapolated. 

Factor income: Labor and property earnings from current production. In national income, it is the 

incomes accruing to labor and property of U.S. residents, which include compensation of employees (received), proprietors’ income, rental income of persons, and corporate profits. 

First approximation: The initial estimate of an economic component, when summed across all states, 

may not equal the national total. This requires an allocation to the states based on the national total. 
GDP by State Estimation Methodology 39 

Fisher ideal price index: The geometric mean of the Laspeyres and Paasche price indexes. The Fisher 

index is superior to either the Laspeyres or the Paasche index if the structure of relative prices in the 

economy changes between the base period and the current period. 

General government sector: Includes production by all Federal, state, and local government agencies 

except for government enterprises. 

Government enterprises: Government agencies that cover a substantial portion of their operating 

costs by selling goods and services to the public and that maintain their own separate accounts. 

Gross domestic income (GDI): Gross domestic income (GDI) is measured as the sum of costs incurred and incomes earned in the production of gross domestic product (GDP). In theory, GDI should 

equal GDP, but in practice they differ because their components are estimated using largely independent 

and less-than-perfect source data. The difference between the two is termed the statistical discrepancy. 

The statistical discrepancy does not exist for NAICS estimates because the NIPAs have been reconciled to 

account for these differences. 

Gross domestic product (GDP) price index: Measures the prices paid for goods and services produced by the U.S. economy and is derived from the prices of personal consumption expenditures (PCE), 

gross private domestic investment, net exports of goods and services, and government consumption expenditures and gross investment. It differs from the gross domestic purchases price index by ignoring 

price changes in imports of goods and services and including price changes in exports of goods and services. 

Gross domestic product (GDP): The market value of the goods and services produced by labor and 

capital in the United States in a single year. GDP replaced GNP as the featured measure of U. S. production in 1991. 

Gross domestic product by industry: Gross product by industry is the contribution of each industry 

and government to the nation’s output, or GDP. An industry’s GDP, often referred to as its “value 

added,” is equal to its gross output (sales and 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). 

Gross domestic product by state: Formally called gross state product (GSP), it is the measure of a 

state’s output; GDP by state is the value added in production by the labor and capital located in a state. 

GDP by state for a state is derived as the sum of the GDP by state originating in all industries in the state. 

In concept, an industry’s GDP by state, referred to as 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, GDP by state is often considered the state counterpart of the nation’s GDP, BEA’s featured measure 

of U.S. output. In practice, GDP by state estimates are measured as the sum of the distributions by industry and state of the components of gross domestic income—that is, the sum of the costs incurred and 

incomes earned in the production of GDP. 

Gross national product (GNP): The market value of goods and services produced by labor and property supplied by U.S. residents, regardless of where they are located. It was used as the primary measure 

of U.S. production prior to 1991, when it was replaced by gross domestic product (GDP). 

Gross operating surplus (GOS): Value derived as a residual for most industries after subtracting total 

intermediate inputs, compensation of employees, and taxes on production and imports less subsidies 

from total industry output. Gross operating surplus includes consumption of fixed capital (CFC), proprietors’ income, corporate profits, nontax payments, and business current transfer payments (net). 

Prior to 2003, it was referred to as other value added or property-type income. 

Gross output: Represents the market value of an industry’s production, including commodity taxes, 

and an adjustment for inventories. GDP from the annual industry accounts, often referred to as value 

added, is obtained as gross output less intermediate goods and services purchased. Current-dollar and 
40 GDP by State Estimation Methodology 

real gross output estimates are provided for the detailed non-manufacturing industries and are used to 

compute industry estimates of gross output at the published industry level. 

Households and institutions sector: Includes all production by households, which consists of families and unrelated individuals, and by nonprofit institutions that primarily serve households (NPISHs). 

Implicit price deflator (IPD): The ratio of the current-dollar value of a series, such as gross domestic 

product (GDP), to its corresponding chained-dollar value, multiplied by 100. 

Imputation: Imputations place a market value on certain transactions that do not occur in the market 

economy. Therefore, they cannot be seen in its records, but are part of the production of goods and services and so need to be included in the measures of economic activity. Imputed interest paid by depository institutions and imputed net rental income of owner-occupied nonfarm dwellings are two examples 

of imputations. 

Input-output (I-O) accounts: Show the relationships between all the industries in the economy and 

all the commodities that these industries produce and use. The estimates of purchases of commodities 

are shown in producers’ prices. The I-O accounts consist of the make table, use table, direct requirements table, and total requirements tables. The make and use table are prepared in two different methods. The first method uses the Standard Industrial Classification System (SIC) or the North American 

Industry Classification System (NAICS). The second method begins with the SIC or NAICS but includes 

adjustments (redefinitions and reclassifications) that move some secondary products from one industry 

to another to attain a common input structure for commodities produced by industries. The direct requirements table and total requirements tables are computed from the make and use tables with redefinition and reclassifications. 

Input-output (I-O) output multipliers: Estimate of output required to satisfy a given level of final 

use. There are three I-O output multipliers, corresponding to the total requirements tables. The first 

multiplier shows the total commodity output required to deliver a dollar of a commodity to final uses; 

the second one shows the total industry output required to deliver a dollar of a commodity to final uses, 

while the third one shows the total industry output required to deliver a dollar of an industry’s output to 

final uses. 

Intermediate purchases: Purchases of intermediate inputs made by industries or government. Related terms: final uses, input-output (I-O) accounts. 

Intermediate inputs: Goods or services that are used in the production process to produce other 

goods or services rather than for final consumption. 

Interpolation: A procedure used to derive a first approximation to a GDP by state component for 

years between the benchmark years, or for years for which the usual allocation data series is not available. 

Either a linear or growth rate procedure may be used depending on the component that is being interpolated. 

Inventory valuation adjustment (IVA): For corporations, the difference between the cost of inventory withdrawals as valued in determining profits before tax and the cost of withdrawals valued at current replacement cost. In a period of rising prices, the IVA will be negative to adjust for increases in 

inventory value not related to current production. A similar adjustment is applied to nonfarm proprietors’ income. 

Kendrick-Jaycox: A mathematical technique, developed by John Kendrick and C. Milton Jaycox, used 

to derive GDP by state by industry by “blowing up” detailed state industry earnings and then allocating 

those derived GDP by state estimates to national controls. 

Laspeyres price index: A fixed-weighted price index that is computed as the sum of base-period 

quantities valued at current-period prices divided by the sum of base-period quantities valued at baseperiod prices. 

Local area personal income: Income that is received by, or on behalf of, all persons who live in a local 

area. It is calculated as the sum of wage and salary disbursements, supplements to wages and salaries, 
GDP by State Estimation Methodology 41 

proprietors’ income with inventory valuation adjustment (IVA) and capital consumption adjustment 

(CCAdj), rental income of persons with CCAdj, personal dividend income, personal interest income, 

and personal current transfer receipts, less contributions for government social insurance. Estimates of 

local area personal income are presented by the place of residence of the income recipients. All estimates 

of local area personal income are in current dollars (not adjusted for inflation). 

Location quotient (LQ): An analytical statistic that measures a region’s industrial specialization relative to a larger geographic unit (usually the nation). An LQ is computed as an industry’s share of a regional total for some economic statistic (earnings, GDP by state, employment, etc.) divided by the 

industry’s share of the national total for the same statistic. For example, an LQ of 1.0 in mining means 

that the region and the nation are equally specialized in mining; while an LQ of 1.8 means that the region 

is relatively more specialized than the nation in mining. 

National income and product accounts (NIPAs): BEA’s economic accounts that display the value and 

composition of national output and the distribution of incomes generated in its production. 

Nontax payment: A government receipt for a good or service that is administrative or regulatory in 

nature; includes regulatory and inspection fees, special assessments, fines and forfeitures, rents and royalties, and donations. 

North American industry classification system (NAICS): An industry classification system that is 

constructed within a single conceptual framework. Economic units that have similar production processes are classified in the same industry, and the lines drawn between industries demarcate, to the extent 

practicable, differences in production processes. NAICS was developed to provide common industry 

definitions for Canada, Mexico and the United States. It replaces the Standard Industrial Classification 

(SIC) system formerly used by U. S. statistical agencies. 

Other corporate capital charges: Includes corporate profits before taxes, net interest, corporate inventory valuation adjustment, corporate capital consumption allowance (CCA), business transfer payments, and subsidies. For the government industries, other capital charges include the consumption of 

fixed capital and subsidies less current surplus of government enterprises. 

Overseas adjustment: An adjustment made to the national estimates of employee compensation to 

exclude the wages and salaries and related components of the income of U. S. residents employed abroad 

(e.g., military personnel stationed abroad). A similar adjustment excludes the consumption of fixed capital attributable to federal military installations abroad. These adjusted national estimates are used in the 

estimation of GDP by state because GDP by state does not include economic activity that takes place 

outside the U. S. 

Paasche price index: A price index that does not assume a fixed consumption pattern; it is computed 

by dividing the product of current prices times current quantities over the product of base period prices 

times current quantities. 

Personal income: Income received by persons from all sources. It includes income received from participation in production as well as from government and business transfer payments. It is the sum of 

compensation of employees (received), supplements to wages and salaries, proprietors’ income with inventory valuation adjustment (IVA) and capital consumption adjustment (CCAdj), rental income of 

persons with CCAdj, personal income receipts on assets, and personal current transfer receipts, less contributions for government social insurance. 

Property-type income (PTI): Comprises proprietors’ income and other capital charges. 

Proprietors’ income: Includes income of unincorporated establishments, rental income of persons, 

proprietors’ inventory valuation adjustment, and non-corporate capital consumption allowance (CCA). 

Quantity indexes: Quantity indexes for GDP by state are Fisher indexes calculated using a formula 

consisting of combinations of prices and quantities for the same year, and indexes of relative prices for 

two adjacent years. 
42 GDP by State Estimation Methodology 

Real GDP by state: An inflation-adjusted measure of each state’s output that is based on national 

prices for the goods and services produced within that state. BEA prepares estimates of real GDP by state 

in millions of chained dollars. The estimates of real GDP by state are derived by applying national implicit price deflators to the current-dollar GDP by state estimates be detailed industry. These estimates of 

real GDP by state reflect the uniqueness of each state’s industry mix, but they do not reflect differences 

by state in the prices of goods and services produced for local markets. 

Rental income of persons with capital consumption adjustment: The net income of persons received from the rental of real property, except for the income of persons primarily engaged in the real estate business; the imputed net rental income of the owner-occupants of farm and nonfarm dwellings, 

and the royalties received by persons from patents, copyrights, and the rights to natural resources. 

RIMS II multipliers: Estimates of regional input-output multipliers for any state, county, or combination of states or counties. The multipliers estimate the impact from changes in final demand on one or 

more regional industries in terms of output, employment, and labor earnings. The multipliers are based 

on estimates of local area personal income and on the national input-output (I-O) accounts. 

Standard Industrial Classification (SIC): A U. S. industry classification system defining and numerically delineating the various industries in the economy, prior to 1997. 

Statistical discrepancy: The difference between gross domestic product (GDP) and gross domestic 

income (GDI). The statistical discrepancy exists only for SIC estimates. 

Subsidies: The monetary grants paid by government agencies to private business or to government 

enterprises at another level of government. 

Supplements to wages and salaries: Comprised of employer contributions to social insurance funds 

and other labor income. Employer contributions are included in GDP by state but not in personal income, which instead counts payments from these funds as income when the payments are received by individuals. 

Taxes on production and imports (TOPI): Consists of Federal excise taxes and customs duties, state 

and local sales taxes, property taxes (including residential real estate taxes), motor vehicle licenses, severance taxes, and special assessments. TOPI does not include nontax payments, whereas indirect business 

tax and nontax liability (IBT), as it was formerly known, did. 

Value added: The difference between an establishment’s total output and the cost of its intermediate 

inputs. It equals gross output (sales or receipts and other operating income, plus inventory change) minus intermediate inputs (consumption of goods and services purchased from other industries or imported). For GDP by state, an industry’s value added includes compensation of employees, indirect 

business tax liability and nontax liability, and property-type income (mainly capital charges). 

Wage accruals less disbursements (WALD): SPI, for purposes of accounting for personal income, 

measures wages and salaries on a cash-flow basis. GDP by state, on the other hand, accounts for the costs 

of production on an accrual basis. In order to account for the difference between annual wage and salary 

disbursements and accruals, an adjustment is made to the wage and salary estimates prepared by SPI. 

Wages and salaries: BEA’s SPI accounts measure wage and salary disbursements before deductions, 

such as social security contributions and union dues, and they include the compensation of corporate 

officers; commissions, tips, and bonuses; voluntary employee contributions to certain deferred compensation plans, such as 401(k) plans; and receipts in kind, or pay-in-kind. The measure reflects the amount 

of wages and salaries disbursed, but not necessarily earned, during the year. That is, SPI, for purposes of 

accounting for personal income, measures wages and salaries on a cash-flow basis. GDP by state, on the 

other hand, accounts for the costs of production on an accrual basis. In order to account for the difference between annual wage and salary disbursements and accruals, an adjustment is made to the wage 

and salary estimates prepared by SPI. This adjustment is referred to as the WALD adjustment, for “wage 

accruals less disbursements.”