Manual on regional accounts methods : 2013 edition.
Date: 2014-02-14
Institutions: Eurostat
Subjects: European accounting system, economic statistics, national accounts, regional accounting, regional statistics, user guide

Manual on regional accounts methods2013 edition2013 editionManual on regional accounts methodsManuals and guidelinesISSN 2315-0815Manuals and guidelines

Manual on regional accounts methods

2013 edition

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Contents

Abbreviations 

Foreword 

1. 

Introduction 

1.1.   Overview 

1.2.   Use of regional accounts for policy and analysis  

1.3.   Relevant statistics 

1.3.1. Regional accounts, a sub-system of national accounts 
1.3.2. Regional Gross Value Added (GVA) and regional Gross Domestic Product (GDP)  
1.3.3. Regional labour data 
1.3.4. Regional Gross Fixed Capital Formation (GFCF) 
1.3.5. Regional sector accounts of households 

1.4.   Historical background  

1.5.  Principles and concepts of regional accounts 

1.6.  Methods 

1.7.   Quality  

1.8.   Scope of the manual 

2. 

General basis for regional accounts 

2.1.  

Introduction 

2.2.   Economic territory  

2.2.1. The regional territory  
2.2.2. The extra-regio territory 
2.2.3. The Nomenclature of Territorial Units for Statistics (NUTS) 
2.2.4. Residence and territory concepts and commuting  

2.3.   Selection of units 

2.3.1. Statistical units and residence in the case of industries  
2.3.2. Statistical units and residence in the case of households  

3.  Methods of regionalisation  

3.1. 

Introduction  

3.2.   Data required for regionalisation  

3.2.1. Regional accounts by industry  
3.2.2. Regional data on GFCF by industry  
3.2.3. Regional accounts of households  

3.3.   Methods of regionalisation  
3.3.1. Bottom-up methods  
3.3.2. Top-down methods  
3.3.3. Mixed methods  

Contents

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Contents 

3.4.   Theoretical concepts for the use of indicators for GVA by industry  

3.5.   Preferred methods of regionalisation  

3.6.  

Improving pseudo-bottom-up, top-down and mixed methods  

3.7.   Adjustment of regional to national values; the non-observed economy  

3.7.1. Regional accounts by industry  
3.7.2. The non-observed economy 
3.7.3. Regional accounts of households  

3.8.   Final and early regional estimates; revisions  

3.9.   Accuracy of regional accounts estimates (A, B and C-methods)  

3.9.1. Introduction 
3.9.2. Regional accounts by industry  
3.9.3. Regional labour data by industry  
3.9.4. Regional data on GFCF 
3.9.5. Regional sector accounts of households  

4. 

General principles and methods for the compilation of regional GVA  
by industry and regional GDP 

4.1.  

Introduction 

4.2.   Applying the production and/or income approach  

4.3.   The choice of indicators in the case of multiregional KAUs, ancillary units  

and units without permanent labour  
4.3.1. Value added of ancillary units of a multiregional enterprise 
4.3.2. Value added of units without significant permanent labour  

4.4.   Transition from regional GVA to regional GDP  

4.4.1. Introduction 
4.4.2.  Regional allocation of Value Added Tax (VAT) and taxes  

and subsidies on products and imports  

4.5.   Regional GDP per capita and regional population 

5. 

5.1. 

Applying the principles for the regional allocation of GVA  
in current prices to particular industries (NACE Rev. 2) 

Introduction  
5.1.1. Industries covered 
5.1.2. Other industries 

5.2.   Mining and quarrying (Section B)  

5.3.   Electricity, gas, steam and air conditioning supply (Section D) and Water supply;  

sewerage, waste management and remediation activities (Section E) 

5.4.   Construction (Section F) 
5.4.1. Allocation of GVA  

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5.5.   Transportation and storage (Section H) and Information and communication (Section J) 

5.5.1. Land and water transport 
5.5.2. Rail transport 
5.5.3. Air transport 
5.5.4. Postal and courier activities 
5.5.5. Telecommunications 

5.6.   Financial and insurance activities (Section K) 

5.6.1. Financial service activities, except insurance and pension funding 
5.6.2. Insurance, reinsurance and pension funding, except compulsory social security 

5.7.   The allocation of FISIM to user industries 

5.8.   Dwelling services of owner-occupiers 

Contents 

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6. 

The compilation of regional GVA in prices of the previous year; volume development of GVA  69

6.1.  

Introduction 

6.2.   The three principles provided by the ‘Handbook’  
6.2.1. The elementary level of aggregation 
6.2.2. The choice of index formula and base year 
6.2.3. Regional GVA time series in prices of a reference year 

6.3.   Criteria for appropriate regional price and volume indicators 

6.3.1. National criteria 
6.3.2. Regional criteria for appropriate price and volume indicators 

6.4.   A, B and C-methods for the compilation of regional GVA in prices of the previous year 

6.5.   Applying the criteria for the compilation of regional GVA in prices  

of the previous year to some particular industries 
6.5.1. Introduction 
6.5.2. Agriculture, forestry and fishing (Section  A) 
6.5.3. Construction (Section F) 
6.5.4. Wholesale and retail trade; repair of motor vehicles and motorcycles (Section G) 
6.5.5. Accommodation and food service activities (Section I) 
6.5.6. Financial and insurance activities (Section K) 
6.5.7. Real estate activities (Section L); of which, imputed rent of owner-occupied dwellings 
6.5.8. Public administration and defence; compulsory social security (Section O) 
6.5.9. Education (Section P) 
6.5.10. Human health activities (Division 86, part of Section Q) 

6.6.   Volume growth rates of regional GVA 

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7. 

General principles for allocating Gross Fixed Capital Formation (GFCF) to regions 

7.1.  

Introduction 

7.2.   Allocation principle  

7.3.   Sales of existing assets  

7.4.   Choice of methods  

7.5.   Preferred methods  

7.5.1. The industry by type of asset approach 
7.5.2. The industry by sectors approach 

7.6.   A, B, and C-methods for the compilation of regional GFCF 

8. 

Applying the principles for the regional allocation of GFCF by particular industries 

8.1.  

Introduction  

8.2.   Mining and quarrying (Section B), Electricity, gas, steam and air conditioning supply (Section D),  

and Water supply; sewerage, waste management and remediation activities (Section E) 
8.2.1. Mining and quarrying (Section B) 
8.2.2. Electricity, gas, steam and air conditioning supply (Section D)  

and Water supply; sewerage, waste management and remediation activities (Section E) 

8.3.   Construction (Section F)  

8.4.   Transportation and storage (Section H) and Information and communication (Section J)  

8.4.1. Transport (excluding rail and air transport) 
8.4.2. Rail and air transport  
8.4.3. Telecommunications  

9. 

General principles for regional labour data by industry 

9.1.  

Introduction 
9.1.1. Labour Force Survey (LFS) 
9.1.2. Structural Business Statistics (SBS) 
9.1.3. Administrative data 

9.2.   Employment 

9.3.   Compensation of employees  

9.4.   Labour productivity 

9.5.   Choice of methods  

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Manual on regional accounts methods  

 
10.  General principles for allocating income transactions and aggregates  

of households to regions 

10.1.   General overview of the household accounts  

10.2.   Clarification of the accounts  

10.2.1. Allocation of primary income account  

(Table 24.6 Full sequence of accounts for households, account II.1.2 in ESA 2010)  

10.2.2. Secondary distribution of income account of households  

(Table 24.6 Full sequence of accounts for households, account II.2 in ESA 2010)  

10.2.3. Redistribution of income in kind account of households  

(Table 24.6 Full sequence of accounts for households, account II.3 in ESA 2010)  

10.2.4. Use of (adjusted) disposable income account of households  

Contents 

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104

104

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105

(Table 24.6 Full sequence of accounts for households, account II.4.1 and II.4.2 in ESA 2010)  

105

10.3.   Sources  

10.4.   The choice of sources and indicators  

10.5.   The allocation of consumption of fixed capital (P.51c) 

10.6.   Links between certain transactions  

10.7.   Summary variables, definitions and possible sources  

Annexes 

Annex 1: Classifications 

Annex 1a: Coding of industries (NACE Rev. 2: A*10, A*38 and A*64) 
Annex 1b: Classifications of transactions in products (P) 
Annex 1c: Classification of institutional sectors (S) 
Annex 1d: Distributive transactions (D) 
Annex 1e: Classification of Individual Consumption According to Purpose (COICOP) 
Annex 1f: Classification of the Functions of Government (COFOG 1999) 

Annex 2: Summary variables, definitions and possible sources of household accounts 

Annex 3: Numerical example of regional household accounts 

Annex 4: Differences between ESA 1995 and ESA 2010, relevant for regional accounts purposes 

Index  

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  Manual on regional accounts methods

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Abbreviations

Abbreviations

Abbreviations
CFC 

Consumption of Fixed Capital

COFOG 

Classification of the Functions of Government

COICOP 

Classification of Individual Consumption According to Purpose

CPA  

CPI 

Classification of Products by Activity

Consumer Price Index

EAA/EAF 

Economic Accounts for Agriculture and Forestry

EFRD 

European Fund for Regional Development

EIB 

ESA 

ESS 

EU 

European Investment Bank

European System of Accounts

European Statistical System

European Union

FISIM 

Financial Intermediation Services Indirectly Measured

FSS 

GDP 

Farm Structure Survey

Gross Domestic Product

GFCF 

Gross Fixed Capital Formation

GNI 

GOS 

GVA 

KAU 

LFS 

NACE 

Gross National Income

Gross Operating Surplus

Gross Value Added

Kind-of-Activity Unit

Labour Force Survey

Nomenclature statistique des Activités économiques dans la Communauté Européenne  
(European industrial activity classification)

NOS 

Net Operating Surplus

NPISH 

Non-Profit Institutions Serving Households

NUTS 

Nomenclature of Territorial Units for Statistics

PIM 

R&D 

QAF 

SBS 

SNA 

VAT 

Perpetual Inventory Method

Research and Development

Quality Assurance Framework

Structural Business Statistics

System of National Accounts

Value Added Tax

10

Manual on regional accounts methods  

 
Foreword

Foreword
Regional  accounts  play  an  important  role  in  the  formulation,  implementation  and  evaluation  of  regional  policies.  In 
particular regional indicators resulting from the regional accounts are used for assessing regional disparities. In the context 
of  the  European  Cohesion  Policy,  regional  Gross  Domestic  Product  (GDP)  is  an  indicator  of  the  regional  accounts  by 
industry, used to allocate funds to eligible regions.

The regional accounts are a regional specification of the national accounts. This manual provides a combined update of the 
two former regional manuals ‘Regional accounts methods, gross value added and gross fixed capital formation by activity’ 
of  1995  and  ‘Household  accounts’  of  1996,  in  line  with  the  European  System  of  Accounts  2010  (ESA  2010),  chapter  13, 
Regional accounts.

ESA  2010,  chapter  13  contains  basic  rules,  but  not  detailed  recommendations  for  their  practical  implementation  in  the 
Member States. Such recommendations have been developed jointly by the representatives of the Member States and the 
Statistical Office of the European Union (Eurostat).

Compared  to  the  former  manuals  new  topics  have  been  introduced.  Regarding  the  regional  accounts  by  industry,  they 
concern: the A, B and C-methods; the treatment of the extra-regio territory; the volume growth rates of regional Gross 
Value Added; the production of units without significant input of labour; the production of ancillary units; regional esti-
mates of employment; and earlier estimates. Regarding the regional accounts of households, they concern: an extension of 
the transactions to include social transfers in kind; and final consumption expenditure of private households. 

This manual has two objectives. Firstly, to provide guidelines to ensure comparable, consistent and sound statistical results 
and secondly, to give users a better idea of the problems encountered and solutions developed, to enable an appropriate use 
of the regional statistical results. 

Eurostat is indebted to the experts from the Members States who, as members of the Task Force, contributed to the prepara-
tion of this manual.

Foreword

  Manual on regional accounts methods

11

 
Introduction

1. 

Introduction

1

1

Introduction

1.1. Overview

Objective,  reliable,  consistent,  relevant  and  harmonised 
regional statistical indicators provide a firm foundation for 
policies  aimed  at  reducing  economic  and  social  dispari-
ties  between  the  European  regions.  Regional  accounts 
play  an  important  role  in  providing  such  essential  indica-
tors.  ‘Regional  accounts  are  a  regional  specification  of  the 
corresponding accounts of the national economy. Regional 
accounts provide a regional breakdown for major aggregates 
such as Gross Value Added (GVA) and household income.’ 
(ESA 2010, par. 13.02) The name ‘regional accounts’ could 
suggest the same coverage of accounts and transactions as 
in the national accounts, which however is not the case. ESA 
2010, Par. 13.04 sheds some light on this phenomenon:

‘Ideally regional accounts cover the same set of accounts 
as  national  accounts,  in  that  they  make  regional 
economic  structures,  developments  and  differences 
visible. However, due to specific conceptual and meas-
urement  problems  they  are  usually  more  limited  in 
scope and detail.’

For  instance,  because  of  the  administrative  burden  it  is 
almost  impossible  for  enterprises  and  statistical  offices  to 
collect data on imports from and exports to other regions. 
Examples  of  conceptual  problems  are  the  regional  alloca-
tion of financial transactions of enterprises with establish-
ments in several different regions or the regional allocation 
of  collective  consumption  of  general  government.  Allo-
cating these transactions to regions based on assumptions 
would be highly questionable. 

The ‘System of National Accounts 2008’ (SNA 2008) draws 
the  conclusion  that  ‘these  conceptual  difficulties  partly 
explain  why  no  country  establishes  the  complete  SNA 
accounts for every region.’ (SNA 2008, par. 18.51)

For  these  reasons,  the  EU  confines  the  regional  accounts 
to  regional  accounts  by  industry  and  regional  household 
accounts.

Regional accounts by industry aim to describe production 
processes  in  regions  including  the  statistical  description 
of production processes of economic entities settled in the 
regions,  with  their  inputs,  outputs,  GVA,  Gross  Domestic 
Product  (GDP),  compensation  of  employees,  and  employ-
ment  involved  in  production.  The  accounts  also  describe 
Gross Fixed Capital Formation (GFCF) by industry. 

The  EU  regional  accounts  of  households  are  limited  to 
income  distribution  and  redistribution  together  with 
income spending. 

Regional accounts generally make use of the concepts of the 
national accounts, though there are issues at regional level 
for  which  additional  compilation  rules  have  to  be  devel-
oped. The main issues are addressed in chapter 13 of ESA 
2010, but not practically specified. 

This  manual  defines  the  general  methodology  of  the 
regional accounts and provides practical guidelines for the 
implementation of the methodology within the framework 
of ESA 2010.

1.2. Use of regional accounts for policy 
and analysis 

The use of regional accounts is widespread. It ranges from 
the  European  Union  to  ministries  and  local  governments 
responsible for regional policy. The accounts are also used by 
universities, enterprises, the media and the general public. 

Data from the regional accounts are used for many purposes. 
They provide data for:

European Union regional policy and analysis:

 — Monitoring  the  eligibility  of  regions  lagging  behind, 
based  on  the  indicator  GDP  per  head  of  the  popula-
tion  (Economic  and  Social  Cohesion).  Council  regula-
tion 1083/2006 on the Structural Funds states in Title I, 
chapter III, Article 5, point 1 on the Convergence objec-
tive: ‘The regions eligible for funding from the Structural 
Funds under the Convergence objective shall be regions 
corresponding to level 2 of the common classification of 
territorial units for statistics (hereinafter NUTS level 2) 
within  the  meaning  of  Regulation  (EC)  No  1059/2003 
whose gross domestic product (GDP) per capita, meas-
ured in purchasing power parities and calculated on the 
basis of Community figures for the period 2000 to 2002, 
is less than 75 % of the average GDP of the EU-25 for the 
same reference period.’ (1)

 — Monitoring  regional  economic  growth  related  to  job 
creation  and  GFCF  (The  Europe  2020  Strategy),  for 
example,  which  regions  contribute  most  to  national 
economic growth, and why?

 — Monitoring the development of regional labour produc-
tivity,  which  is  relevant  for  overall  growth  against  the 
background  of  an  aging  population  of  the  EU  (The 
Europe 2020 Strategy). 

 — Monitoring regional employment rates as an indicator of 

labour participation (The Europe 2020 Strategy).

 — Monitoring  the  development  of  regional  adjusted 
disposable income of households and their actual indi-
vidual consumption and saving, to identify changes in 
disparities of regional welfare. 

(1)  Article 5, points 2 and 3 also state: ‘The Member States eligible for funding from the 

Cohesion Fund shall be those whose gross national income (GNI) per capita, measured 
in purchasing power parities and calculated on the basis of Community figures for the 
period 2001 to 2003, is less than 90 % of the average GNI of the EU-25 and which have 
a programme for meeting the economic convergence conditions referred to in Article 
104 of the Treaty. Immediately following the entry into force of this Regulation, the 
Commission shall adopt the list of regions fulfilling the criteria under paragraph 1 and 
of Member States fulfilling the criteria under paragraph 2. This list shall be valid from 
1 January 2007 to 31 December 2013.‘

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Manual on regional accounts methods  

Introduction 1

Central  government  and  national  planning  offices  of 
Member States for both regional policy and analysis:

 — Informing  regional  policy  by  highlighting  regions 
lagging behind. The policy measures include investment 
in  infrastructure  and  support  of  investment  in  enter-
prises with effects on the regional economies and labour 
markets (impact studies).

 — Regional labour productivity studies.

 — Analysis  of  the  contribution  of  regions  to  the  national 

aggregates.

 — Analysis of the specialisation of the regions.

 — Analysis of the role of regions for each industry. 

Regional  and  local  government  for  both  regional  policy 
and analysis:

 — The size and autonomy of regions within the European 
Union  differ  between  countries.  More  autonomous 
regional  governments  need  almost  the  same  informa-
tion as central government.

 — Studies  utilising  regional  accounts  data  generally  rank 
the position of regions within the country or the Euro-
pean Union. 

Universities, research institutions and schools, mainly for 
analysis:

 — Impact studies. 

 — Regional labour market studies. 

 — Analysis of the specialisation of the regions.

 — Analysis of the role of regions for each industry.

Enterprises: 

Studies  by  enterprises  about  where  to  establish  their  head 
offices or production plants require, amongst other things, 
information on the availability of supply industries, service 
industries, the labour market situation and their consumers.

1.3. Relevant statistics

1.3.1. Regional accounts, a sub-system of 
national accounts

ESA 1995 was the first ESA manual to devote a chapter to 
regional accounts. SNA 1993 also devoted some paragraphs 
to regional accounts (19.88-19.96). ESA 1995 stated that the 
‘regional accounts are a regional specification of the corre-
sponding  accounts  of  the  total  economy’  and  SNA  1993 
also assumed that implicitly. ESA 2010 reiterated the close 
relationship  of  regional  accounts  with  national  accounts 
concepts and SNA 2008 implicitly assumes this relationship. 

The  national  accounts  describe  the  behaviour  of  institu-
tional units and the activities in which they engage, namely 
production, consumption and accumulation of assets. Resi-
dence  of  the  institutional  units  in  the  country  is  funda-
mental to the allocation of the activities to the country. 

These statistical concepts are also the basis for the regional 
accounts.  The  description  of  the  economy  of  a  region  is, 
like  in  the  national  accounts,  based  on  institutional  units 
located in the region with their activities, such as produc-
tion, consumption and capital formation. 

There are practical and conceptual problems when describing 
a  regional  economy.  Regional  accounts  of  households  in 
principle require some additional guidelines, although the 
national accounts concepts almost fully apply. For example, 
it is necessary to clarify some aspects of regional accounts of 
households, such as the allocation of income and consump-
tion of students studying in regions other than their home 
region.

There  are  examples  of  regional  economic  phenomena 
where guidelines additional to national accounts practices 
are necessary. These additional guidelines concern mainly 
regional accounts by industry:

 — A general problem for the accounts by industry is that 
enterprises  may  consist  of  several  establishments  in 
different regions within the country. For instance, there 
may be a head office in one region (often in urban areas) 
and  production  establishments  in  other  regions  (often 
in more peripheral regions). In such a case each of the 
establishments  of  the  institutional  unit  should  have  to 
provide information on output, intermediate consump-
tion and thus value added which in practice is not the 
case.  Allocating  all  value  added  to  the  head  office  or  a 
kind of quasi-regio would be a solution, however a solu-
tion that does not reflect the activities of the establish-
ments  in  the  region  and  one  which  would  destroy  the 
relationship  of  these  establishments  with  the  regional 
labour  market,  other  establishments  in  or  outside  the 
region  and  the  resident  households  with  their  income 
and  consumption.  Additional  guidelines  for  regional 
accounts are required to reflect the real economic situ-
ation. 

 — Another  general  problem  is  the  existence  of  the  extra-
regio territory. It mainly concerns activities of mineral 
exploration  and  extraction  by  enterprises  at  the  conti-
nental shelf and activities of government agencies in the 
rest of the world (embassies, consulates, military bases, 
scientific bases, etc.). In national accounts the activities 
of these units are part of the national economic territory. 
The question here is where to allocate these activities. In 
practice,  most  of  the  statistical  offices  did  not  allocate 
these  transactions  to  the  extra-regio  territory  because 
the  transactions  were  not  applicable  or  were  thought 
of  no  importance  or  data  were  not  available.  In  many 

  Manual on regional accounts methods

15

1

Introduction

countries  the  transactions  were  allocated  to  the  main-
land,  often  the  city  where  central  government  resided. 
The extra-regio territory appears as an additional region 
in the regional accounts by industry.

 — Enterprises  may  have  large  capital-intensive  produc-
tion  units  in  a  region  and  a  distribution  network  of 
pipelines  and  cables  or  a  wireless  network  which  may 
cross regional boundaries. Examples are enterprises that 
distribute  electricity  or  gas,  refineries  that  distribute 
fuel via pipelines, and telephone companies that provide 
their services via cables or wireless networks, not only 
to  the  region  where  they  are  located  but  also  to  other 
regions. This is a conceptual problem for which guide-
lines are necessary to ensure internationally comparable 
results. 

 — Enterprises in construction may not only build houses, 
buildings, bridges, roads, etc. in the region where they 
are  settled,  but  also  in  other  regions.  The  concept  in 
regional accounts is clear; it should be allocated to the 
region of the building site for projects of a year or longer. 
The practical implementation, however, depends largely 
on available statistical sources.

 — Railway  enterprises  consist  of  head  offices,  stations, 
workplaces for the repair of trains or tracks, signal boxes, 
railway lines, each of which has a regional dimension. In 
this case ancillary units are of importance. The complex 
problems  here  are  partly  practical  and  partly  concep-
tual.  The  conceptual  problem  concerns  the  allocation 
of  the  net  operating  surplus  of  the  railway  enterprise 
to  its  establishments  in  different  regions. The  practical 
problem concerns the availability of regional indicators, 
such as consumption of fixed capital. For both problems, 
additional guidelines are necessary.

 — There may be units without significant input of labour. 
Typical examples are units for energy production (wind-
mills,  gas  and  oil  extraction),  unstaffed  petrol  stations 
and  telecommunication  networks  for  mobile  phones. 
One  must  consider  where  to  allocate  these  activities. 
These cases differ from the example of the railway enter-
prises as there are no establishments with labour input. 
The  conceptual  question  here  is  whether  value  added 
should be linked to capital productivity. 

 — Last but not least, many source data are based on samples 
designed  for  national  and  not  for  regional  purposes. 
The  only  way to estimate regional accounts data  is  the 
use of regional indicators and small area estimates. The 
manual will focus on a correct use of regional indicators.

1.3.2. Regional Gross Value Added (GVA) and 
regional Gross Domestic Product (GDP) 

Regional  accounts  by  industry  are  a  regional  specification 
of the corresponding accounts of the nation. These accounts 
make  use  of  the  concepts  and  classifications  used  for  the 

national accounts. Regional GVA and regional GDP are the 
main economic indicators resulting from these accounts.

Regional  GVA  can  be  defined  from  two  perspectives: 
the  production  approach,  and  the  income  approach.  The 
former  may  be  defined  in  current  prices  and  in  prices  of 
the previous year. There is a third method, the expenditure 
method, which cannot be applied for practical reasons, e.g. 
the absence of data on imports and exports between regions.

Using  the  production  approach,  GVA  can  be  defined  as 
follows:

Regional GVA at basic prices by industry is equal to the 
difference between output (at basic prices) and interme-
diate consumption (at purchasers’ prices). 

Using the income approach, GVA can be defined as follows:

Regional GVA at basic prices by industry is equal to the 
sum of other taxes less subsidies on production, wages 
and salaries, employers’ social contributions, consump-
tion of fixed capital and net operating surplus.

Regional GDP can be defined as regional GVA plus taxes on 
products less subsidies on products. 

The industry classification is based on NACE Revision 2 (see 
Annex 1a).

1.3.3. Regional labour data

Regional accounts by industry focus, in addition to regional 
GVA and GDP, on labour input and related labour costs. This 
information will generally be collected from enterprises or 
government administrations. This implies that labour input 
also includes non-residents who work for resident regional 
production  units  (i.e.  domestic  concept).  The  regionalisa-
tion of the labour data is based on the same concepts as for 
the regional allocation of production and is therefore closely 
related. 

It is quite obvious that developments of the regional labour 
market  are  closely  related  to  developments  in  production 
activities.  One  of  the  top  priorities  for  all  governments  is 
to  keep  unemployment  as  low  as  possible.  An  important 
instrument is creating and stimulating economic activities 
in  regions  and  thus  stimulating  employment.  That  is  why 
growth of employment is highly relevant.

1.3.4. Regional Gross Fixed Capital Formation 
(GFCF)

Fixed  capital  formation  is  the  expenditure  on  produced 
tangible or intangible assets that are used in the production 
process for more than one year.

GFCF  consists  of  producers’  acquisitions  less  disposals  of 
fixed assets:

 — Acquisitions  less  disposals  of  tangible  fixed  assets 

consisting of:

16

Manual on regional accounts methods  

Introduction 1

•	 Dwellings and non-residential buildings.

•	 Civil engineering works.

•	 Transport equipment.

•	 Machinery, equipment and computers.

•	 Cultivated assets (trees and livestock).

 — Acquisitions  less  disposals  of  intangible  fixed  assets 

consisting of:

•	 Mineral exploration.

•	 Computer software.

•	 Entertainment, literary or artistic originals.

•	 Other intangible fixed assets.

 — Major improvements to land (reclamation, land consoli-

dation and preparing land for building).

 — Fixed capital formation also includes:

•	 Work in progress of construction, such as unfinished 
dwellings,  non-residential  buildings  and  civil  engi-
neering  works.  These  are  recorded  as  fixed  capital 
formation of the client.

•	 Military  structures  and  equipment,  similar  to  those 
used by civilian producers, such as airfields and hospi-
tals.

•	 Improvements  to  existing  fixed  assets  that  go  well 
beyond  the  requirements  of  ordinary  maintenance 
and repairs. 

•	 Transfer costs of fixed assets, such as conveyance fees 
and  costs  made  by  real  estate  agents,  architects  and 
notaries.

The registration of fixed capital formation by industry and 
sector is on an owner basis. That means that fixed capital 
formation  is  assigned  to  the  industry  and  region  which 
can be considered the economic owner of the capital goods 
concerned. Fixed assets owned by a multiregional unit are 
allocated to the establishments where they are used. 

As in national accounts fixed assets obtained through oper-
ational leasing are recorded in the region of the owner and 
those through financial leasing, in the region of the user.

1.3.5. Regional sector accounts of households

The  regional  sector  accounts  of  households  are  a  regional 
specification of the corresponding national accounts based 
on  the  households  that  are  resident  in  the  regional  terri-
tory  (ESA  2010,  par.  13.51).  With  few  exceptions  the  rules 
for determining the residence of households at the national 
level also apply to the regional accounts of households. 

The household sector (S.14) covers individuals or groups of 
individuals as consumers and possibly also as entrepreneurs 

producing  market  goods  and  non-financial  and  financial 
services  (the  unincorporated  enterprises).  It  also  includes 
individuals  or  groups  of  individuals  as  producers  of  goods 
and non-financial services exclusively for their own final use. 

The  principal  resources  of  these  units  are  derived  from 
compensation  of  employees,  property  income,  transfers 
from other sectors, the receipts from the disposal of market 
products, or the imputed receipts from the output of prod-
ucts for own final consumption.

The main accounts and balancing items are:

 — The allocation of primary income account of households 

with primary income (B.5) as the balancing item.

 — The secondary distribution of income account of house-
holds  with  disposable  income  (B.6)  as  the  balancing 
item.

 — The redistribution of income in kind account of house-
holds  with  adjusted  disposable  income  (B.7)  as  the 
balancing item. 

 — The  use  of  disposable  income  account  of  households 
with final consumption expenditure (P.3) as an impor-
tant variable, and saving (B.8) as the balancing item.

 — The  use  of  adjusted  disposable  income  of  households 
with  actual  final  consumption  expenditure  (P.4)  as  an 
important  variable,  and  saving  (B.8)  as  the  balancing 
item.

The balancing items can be gross or net of consumption of 
fixed capital (P.51c).

The  regional  accounts  of  households  enable  inter-regional 
comparison of the main transactions in which households 
are involved. They present differences in the way in which 
income  is  generated  in  the  different  regions  and  regional 
levels  of  households’  disposable  income  and  saving.  They 
are therefore a useful tool for policy-makers working at the 
regional level in both the Member States and the EU. 

However,  one  has  to  bear  in  mind  that  disposable  income 
of  households  only  describes  part  of  a  country’s  dispos-
able  income  of  all  sectors.  The  share  of  household  dispos-
able income in total disposable income varies across the EU 
Member  States,  complicating  the  inter-country  compar-
ison  of  regional  disposable  income  and  consumption.  The 
inclusion of social transfers in kind improves international 
comparability,  though  institutional  differences  remain 
between the Member States which affect the comparability 
of  regional  adjusted  disposable  income.  For  example,  in 
2010 the share of net adjusted disposable income of house-
holds and non-profit institutions serving households in net 
disposable income of the total economy was 88 per cent for 
Germany and 76 per cent for the Netherlands.

  Manual on regional accounts methods

17

1

Introduction

1.4. Historical background (2) 

The  Treaty  of  Rome  of  25th  March  1957  recognised  the 
regional dimension when establishing the European Invest-
ment Bank (EIB). The task of the EIB was amongst others 
facilitating ‘projects for developing less developed regions’.

An important moment for the regional policy of the Euro-
pean Communities was the proposal for a regulation of the 
Commission  to  the  Council  dated  October  1969.  In  this 
proposal  the  need  for  regional  development  programmes 
and effective financial means to stimulate the creation of the 
development programmes were discussed. 

In February 1971 the Council accepted the third economic 
policy programme for the medium term. This programme 
underlined the responsibility of the Member States and the 
European  Community  to  deal  with  a  number  of  regional 
problems of general concern, to reach a balanced develop-
ment of the Community. Also, priorities for regional policy 
were set in the proposal. It regarded regions lagging behind 
in  economic  development  (the  so-called  objective-1  areas) 
and  regions  faced  with  a  decline  in  previously  dominant 
economic activities in the region (the later so-called objec-
tive-2 regions). 

The  political  programme  resulted  in  1975  in  a  regulation 
concerning the European Fund for Regional Development 
(EFRD) and an adjustment to the regulation in 1980. This 
fund  aimed  at  improving  the  regional  balance  within  the 
Communities. 

In  this  climate,  favourable  for  the  development  of  the 
regional accounts, a first meeting about ‘Economic accounts 
and statistical indicators at the regional level’ took place in 
1970 between representatives of the statistical offices of the 
six Member States and Eurostat. In this meeting the need 
for mutual comparability was emphasised because of the big 
differences in available information and in the methodolo-
gies used.

input-output 

to  Eurostat,  regional 

According 
tables, 
compiled by Statistics Netherlands for 1960 and 1965, could 
serve as a good framework for the development of co-ordi-
nated and related regional statistics. Beside these, regional 
indicators had to be developed. The indicators had to make 
possible to assess the regional economic developments and 
the economic and social differences between the regions of 
the European Community. 

Three  indicators  were  considered  to  be  important:  GVA, 
consumption expenditure of households and GFCF. Euro-
stat  stipulated  the  fit  between  the  indicators  and  similar 
variables  in  the  regional  input-output  tables.  The  indica-
tors had to be compiled annually, in the first instance at an 

aggregated regional level comparable with the later NUTS  2 
level and in a later stage for smaller areas corresponding to 
the  later  NUTS  3  level  (Eurostat,  1974 (3)). The  Nomencla-
ture  of  Territorial  Units  for  Statistics  (NUTS)  provides  a 
single  uniform  breakdown  for  the  production  of  regional 
statistics for the EU at specific geographical levels. 

The  NUTS  classification  was  established  by  Eurostat  in 
the  early  1970s  as  a  single,  coherent  system  for  dividing 
up European Union territory in order to produce regional 
statistics for the EU. The NUTS classification has been used 
in EU legislation since 1988 (4), but it was only in 2003, after 
three years of preparation, that a European Parliament and 
Council  Regulation  on  NUTS  was  adopted (5).  Since  that 
time,  any  changes  within  Member  States  relating  to,  for 
instance, local authority boundaries, need to go through a 
formal process of application to the EU, with any changes 
being implemented at the end of pre-set periods of enforced 
stability.

From  the  further  discussions  in  the  period  1970–1972  we 
can see an agreed preference for the development of regional 
indicators  instead  of  regional  input-output  tables.  These 
indicators were: ‘employment, new GFCF and value added, 
in all cases classified by industry.’

The  regional  policy  of  the  European  Union  (EU)  around 
and after 1985 had a tremendous impact on the development 
of the regional accounts. In that period a series of regula-
tions  was  adopted,  regarding  for  instance,  the  regulations 
concerning  the  European  Regional  Development  Fund, 
the European Social Fund and a regulation concerning the 
tasks of the Structural Funds. The latter regulation explic-
itly  defines  regions  lagging  behind.  These  are  regions  at 
NUTS 2 level for which the GDP per capita, and differences 
in purchasing power parities, remains under 75 per cent of 
the average of the EU. This was the first time that GDP per 
region was included in an EU regulation. Regions that met 
this criterion were eligible for substantial financial aid from 
the Structural Funds. 

This regulation was followed by a regulation concerning the 
European System of Accounts (ESA 1995). ESA 1995 served 
as the methodological basis for the compilation of compa-
rable national and regional accounts for the Member States 
of  the  EU.  The  regulation  also  specified  which  statistical 
data the Member States have to provide. 

For  the  regional  accounts,  it  concerned  the  provision  of 
data concerning GVA, employed persons, compensation of 
employees and GFCF. Simplified regional accounts of house-
holds  at  NUTS  2  level  became  obligatory,  with  disposable 

(3)  Work document for the meeting of the workgroup ‘Economic aggregates and Statistical 

indicators at Regional Level’ at 15 and 16 January 1974.

(4)  Council Regulation (EEC) No 2052/88 on the tasks of the Structural Funds: OJ L 185, 

15.7.1988.

(2)  This paragraph is based on ‘Century of statistics’, Statistics Netherlands 1999. 

Chapter 10, Data for regional economic policy: forty years of regional accounts by Bas 
de Vet.

(5)  Regulation (EC) No 1059/2003 of the European Parliament and of the Council of 26 May 
2003 on the establishment of a common classification of territorial units for statistics 
(NUTS).

18

Manual on regional accounts methods  

Introduction 1

income of households per capita as the most important indi-
cator. The increasing importance of the regional structural 
policy for the EU appears not only from the regulations, but 
also from the allocation of substantial financial resources. 
Of the total budget of the EU available in 1993, 31 per cent 
was spent on structural measures. For the period 2007–2013 
it had grown to 36 per cent. 

The  growing  importance  of  the  regional  policy  of  the  EU 
and its financial consequences led to an increasing need for 
comparable regional data from the Member States. Because 
of  this,  Eurostat  promoted  the  development  of  new  meth-
odologies  improving  the  comparability  of  the  data.  Meth-
odology  was  on  the  agenda  of  many  meetings  at  Eurostat 
in the period 1990–1996. This led to the development of a 
harmonised methodology of regional accounts. 

During the first decade of the 21st century the focus of the 
regional accounts was on quality and methodological issues 
such as volume growth rates, earlier estimates for key vari-
ables  and  the  treatment  of  new  technological  phenomena 
such as the appearance of production units without signifi-
cant input of labour (e.g. telecommunication networks for 
mobile phones).

1.6. Methods

Methods  vary  between  Member  States  because  they  are 
determined by the type of data available and the organisa-
tion of the national statistical system. 

Nevertheless,  different  methods  can  produce  comparable 
results.  For  example,  output  and  income  data  can  both 
produce valid measures of GVA. Of course there is always 
room to harmonise and improve methods of compiling the 
data, in particular where data are incomplete. In such cases 
regional indicators might be used to allocate a national vari-
able to regions. The extent to which an indicator reflects the 
variable to be measured is a topic that will also be discussed 
in this manual.

More fundamentally, some national accounts concepts can 
be interpreted in different ways at regional level and princi-
ples have to be developed to deal with multiregional enter-
prises. 

The ESA 2010 regional chapter 13 develops the interpreta-
tion  of  some  national  accounts  concepts  at  regional  level. 
This  should  lead  to  greater  comparability  between  the 
Member States. 

1.5. Principles and concepts of regional 
accounts

1.7.  Quality (6)

Regional accounts are a regional specification of the corre-
sponding  accounts  of  the  nation.  Thus  regional  accounts 
make  use  of  the  concepts  used  for  national  accounts. 
There  are  substantial  conceptual  and  practical  difficul-
ties  in  compiling  a  full  set  of  accounts  at  the  regional 
level.  Therefore,  ESA  2010  specifies  a  limited  system  of 
regional accounts. This covers some aggregates by industry 
and  simplified  accounts  of  households.  The  new  regional 
chapter 13 in the revised ESA 2010 provides the main issues 
regarding  concepts,  principles  and  methods.  Chapter  13 
covers some new items, such as: 

 — Production activities without significant labour input.

 — The allocation of FISIM to user industries.

 — Volume growth rates of regional GVA.

Chapter  13  of  ESA  2010  will  be  supplemented  by  this 
manual  giving  more  practical  guidance  on  the  compila-
tion  of  regional  accounts  by  industry  and  regional  house-
hold accounts. The regional accounts by industry comprise: 
regional  GVA,  total  employment,  employees,  compensa-
tion  of  employees  and  regional  GFCF.  Special  attention 
will be given to the volume growth rates of regional GVA. 
Regional  accounts  of  households  focus  on  primary  and 
(adjusted)  disposable  income  of  households  and  (actual) 
final consumption expenditure.

Eurostat’s aim is to provide the European Union with a high 
quality statistical information service. Accordingly, quality 
considerations  play  a  central  role  with  regard  to  Eurostat 
corporate  management  as  well  as  day-to-day  statistical 
operations. 

With  the  adoption  of  the  European  Statistics  Code  of 
Practice,  Eurostat  and  the  statistical  authorities  of  the  EU 
Member  States  have  committed  themselves  to  an  encom-
passing approach towards high quality statistics. The Code 
of  Practice  builds  upon  a  common  European  Statistical 
System  (ESS)  definition  of  quality  in  statistics.  It  targets 
all  relevant  areas  from  the  institutional  environment,  the 
statistical production processes to the output of statistics.

Quality  reporting  presents  information  on  the  quality  of 
the Eurostat products as well as on tools and standards for 
quality  reporting  agreed  within  the  European  Statistical 
System. 

The  Eurostat  Quality  Assurance  Framework  (QAF) (7)  is 
embedded in Total Quality Management and describes the 
tools and procedures put in place to ensure that the statis-
tics produced are of high quality. In this manual the focus is 
on statistical outputs, which are covered by principles 11 to 
15 of the Code of Practice.

(6)  Reference to the European statistics code of practice, Eurostat, 2005 and the European 
Statistic Systems Committee, Eurostat 2011 for an update of the Code of Practice.

(7)  See the Eurostat website, the item ‘quality and selected ESS practices’. 

  Manual on regional accounts methods

19

1

Introduction

For the purpose of the QAF, the quality of statistical outputs 
is assessed against six criteria:

1.8. Scope of the manual

This  manual  is  intended  to  help  regional  statisticians 
to  produce  figures  which  provide  a  firm  foundation  for 
regional policy. The manual should also help users to better 
understand the figures and to use them more appropriately.

 — Relevance.

 — Accuracy and reliability.

 — Timeliness and punctuality.

 — Accessibility and clarity.

 — Comparability.

 — Coherence.

This  manual  focuses  on  accuracy  and  reliability,  timeli-
ness,  comparability  and  coherence.  It  concentrates  on  the 
regional accounts methodology, but other aspects must not 
be  forgotten.  Accuracy  of  the  source  data  is  often  outside 
the  control  of  the  statistician  responsible  for  the  regional 
accounts. So coordination with other statisticians is also a 
key issue for the regional accounts. Accuracy of the regional 
accounts estimates (A, B and C-methods) will be discussed 
in par. 3.9.

20

Manual on regional accounts methods  

General basis for 
regional accounts

2

2.  General basis 

for regional 

accounts

2

General basis for regional accounts

2.1. Introduction

This  chapter  explores  the  general  principles  to  be  adopted 
in measuring the GVA and GFCF of the production units 
resident  in  a  given  region.  This  chapter  also  discusses  the 
general  principles  of  measuring  primary  and  disposable 
income,  final  consumption  expenditure  and  saving  of 
households.

The first step is to define the regional territory, the Nomen-
clature  of  Territorial  Units  for  Statistics  (NUTS)  and  the 
main approach to regionalisation (par. 2.2).

Secondly the role of the statistical units will be discussed. 
Regionalisation  can  be  seen  from  the  point  of  view  of  the 
units resident in the region and their activities. It can also be 
seen from the point of view of activities in a region regard-
less of the economic agents involved. The first approach is 
denominated  as  an  institutional  approach.  Following  the 
institutional  approach  of  the  national  accounts,  the  next 
step clarifies the role of the economic agents in the region. 
For the regional accounts by industry these are the estab-
lishments  of  the  enterprises  and  for  the  regional  accounts 
of  households  these  are  the  private  households. The  many 
different forms of statistical units and their different char-
acteristics will be discussed in detail (par. 2.3).

Thirdly  the  methods  of  regionalisation  will  be  discussed 
(see chapter 3). The focus will be on data requirements and 
related methods of regionalisation, which could be bottom-
up, top-down or mixed methods. From an accuracy point 
of view, a ranking of preferred methods can be given. Users 
need  more  timely  data,  so  final  and  provisional  estimates 
will also be discussed. The revisions to the provisional esti-
mates are an important quality indicator. It will be shown 
that the provisional estimates of the national accounts play 
an important role in revisions to regional estimates.

Fourthly  the  general  principles  and  methods  will  be 
discussed  for  regional  GVA  by  industry  in  current  prices 
and in prices of the previous year (see chapters 4–6).

Fifthly the general principles and application of the regional 
allocation of GFCF by industry will be discussed in chap-
ters 7 and 8. Employment and compensation of employees 
will be discussed in chapter 9 and the regional accounts of 
households in chapter 10.

The  differences  in  approach  between  Member  States  may 
appear large at first sight. But diverse methods can produce 
equally valid and comparable results. Also on closer exami-
nation, the actual methods of compilation are often remark-
ably similar at a detailed level. For example, wages and sala-
ries are the key determinant of GVA in several industries in 
both output- and income-based methods.

2.2. Economic territory 

2.2.1. The regional territory 

The  economic  territory  of  a  country  is  unambiguously 
defined  in  ESA  2010  (2.05).  A  regional  economy  of  a 
country  is  part  of  the  total  economy  of  that  country.  The 
total  economy  is  defined  in  terms  of  institutional  units 
and  sectors.  It  consists  of  all  the  institutional  units  which 
have a centre of predominant economic interest within the 
economic  territory  of  a  country  (see  ESA  2010,  par.  2.04). 
The economic territory does not coincide exactly with the 
geographic territory (see ESA 2010, par. 2.05). The economic 
territory  of  a  country  is  divided  into  regional  territory 
and  the  extra-regio  territory.  The  former  consists  of  that 
part of the economic territory of a country that is directly 
assigned to a region, including any free zones and bonded 
warehouses. The latter is made up of parts of the economic 
territory of a country which cannot be assigned to a single 
region. 

2.2.2. The extra-regio territory

The extra-regio territory consists of:

a.  The national air-space, territorial waters and the conti-
nental shelf lying in international waters over which the 
country enjoys exclusive rights.

b.  Territorial exclaves (i.e. geographic territories situated in 
the rest of the world and used, under international trea-
ties  or  agreements  between  states,  by  general  govern-
ment agencies of the country, e.g. embassies, consulates, 
military bases, scientific bases etc).

c.  Deposits of oil, natural gas etc. in international waters, 
outside the continental shelf of the country, worked by 
resident units (see ESA 2010, par. 13.09 to 13.11).

2.2.3. The Nomenclature of Territorial Units for 
Statistics (NUTS)

The Nomenclature of Territorial Units for Statistics (NUTS) 
provides a single uniform breakdown of the economic terri-
tory of the European Union (8). 

The NUTS classification is a hierarchical system for dividing 
up the economic territory of the EU for the purpose of: 

 — The  collection,  development  and  harmonisation  of  EU 

regional statistics. 

 — Socio-economic analysis of the regions.

 — Framing of EU regional policies. 

(8)  As defined by Regulation (EC) No. 1059/2003 of 26 May 2003 and its subsequent 

amendments.

22

Manual on regional accounts methods  

General basis for regional accounts 2

2.2.4. Residence and territory concepts and 
commuting 

Economic transactions of both enterprises and households 
may  cross  regional  boundaries.  For  instance,  transport 
services  and  energy  supply  can  consist  of  moving  goods 
between  two  or  more  regions.  Employees  can  earn  their 
wages or salaries in a region different from their home region 
and households can spend part of their income outside the 
resident region. Enterprises may also operate in more than 
one  region,  either  at  permanent  sites  or  on  a  temporary 
basis, e.g. builders may undertake work in different regions. 
Therefore a clear principle is needed to help Member States 
to consistently allocate this interregional activity to a region.

The residence concept

The general principle for regional accounts is that transac-
tions should be allocated to the region where the production 
unit or household is resident (see ESA 2010, par. 2.01, 2.04 
and 13.24).

Par.  2.01:  ‘The  economy  of  a  country  is  a  system  whereby 
institutions  and  people  interact  through  exchanges  and 
transfers  of  goods,  services  and  means  of  payments,  (e.g. 
money), for the production and consumption of goods and 
services. In the economy, the units interacting are economic 
entities that are capable of owning assets, incurring liabili-
ties and engaging in economic activities and in transactions 
with  other  entities. They  are  known  as  institutional  units. 
Defining the units used in national accounts serves various 
purposes. 

First,  units  are  the  essential  building  blocks  in  defining 
economies  in  geographical  terms,  e.g.  nations,  regions, 
and nation groupings such as monetary or political unions. 

Second, they are the essential building blocks for grouping 
units into institutional sectors. 

Third, they are essential for defining which flows and stocks 
are  recorded.  Transactions  between  various  parts  of  the 
same institutional unit are in principle not recorded in the 
national accounts.’

Par.  2.04:  ‘The  units  which  constitute  the  economy  of  a 
country  and  whose  flows  and  stocks  are  recorded  in  the 
ESA  are  those  which  are  resident.  The  residence  of  each 
institutional unit is the economic territory where a unit has 
its centre of predominant economic interest. These units are 
known  as  resident  units,  irrespective  of  nationality,  irre-
spective  of  legal  form,  and  irrespective  of  presence  on  the 
economic territory at the time they carry out a transaction.’

The residence principle implies for instance that GVA from 
transporting goods across several regions will not be parti-
tioned between the regions, but allocated to the region where 
the production unit is resident. An example for households 
is  that  household  expenditures  in  another  region  will  be 
allocated to the region of residence of the household.

Another consequence is that value added of enterprises with 
establishments in more than one region will be allocated to 
the  regions  where  the  establishments  are  located  and  will 
not be allocated entirely to the head office or administrative 
address of the enterprise. 

The territory concept 

An alternative concept, which is generally not applied in the 
national and regional accounts, would be strictly territorial. 
This concept implies that activities are allocated to the terri-
tory  where  they  actually  take  place,  regardless  of  the  resi-
dence of the units involved in the activity.

Though  the  residential  approach  takes  precedence  for  the 
regional  allocation  of  transactions  of  resident  units,  ESA 
2010,  par.  13.21  seems  to  give  some  limited  scope  for  the 
application  of  the  territorial  approach.  This  occurs  where 
notional  units  are  created  for  land  and  buildings  in  the 
region or country in which the land or buildings are located. 
This is based on ESA 2010, par. 2.11, which states: ‘All units 
in  their  capacity  as  owners  of  land  and/or  buildings  that 
form  part  of  the  economic  territory  are  resident  units  or 
notional resident units of the country in which the land or 
buildings in question are located’ and ESA 2010, par. 2.49: 
‘Non-financial corporations include notional resident units 
which are treated as quasi-corporations’.

In  the  hypothetical  case  where  units  resident  in  a  region 
only have activities within their regional territory, the resi-
dence concept coincides with the territory concept. This is 
also the case for the regional allocation based on notional 
units created for land and buildings and for unincorporated 
enterprises in other countries or in regions that are different 
from the region of residence of the owner. 

The  main  question  remains  whether  production  activities 
without  significant  labour  input  at  a  fixed  location  (e.g. 
windmills, the extraction of oil and gas, internet hubs, tele-
communication  networks  particularly  for  mobile  phones) 
and utilities that are split into infrastructure and operation 
should be regarded as notional units. This will be discussed 
in  par.  2.3.1.5,  ‘Units  without  permanent  labour  or  fixed 
location’.

Commuting

Commuting  can  cross  national  boundaries  but  is  more 
common between regions, particularly for smaller regions 
and around metropolitan centres. In the EU there are many 
of  these  metropolitan  areas,  such  as:  Bratislava,  Brussels, 
Hamburg,  Ile  de  France  (Paris),  Inner  London,  Lisbon, 
Luxembourg,  Madrid,  Milan,  Prague,  Rome,  Utrecht, 
Vienna and Warsaw.

Commuters can be employees or self-employed. According 
to the residence principle, commuters contribute to GVA in 
the  country  and  region  in  which  the  establishment  where 
they work is resident. Thus the regional estimates for labour 

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costs reflect the wages and salaries at the place of work and 
not at the dwelling place of the employees or self-employed. 
As  a  result,  commuting  affects  the  interpretation  of  GVA 
and GDP per head of the population. Net commuter inflows 
into  regions  increase  production  beyond  that  possible  by 
the resident active population. GDP per capita appears rela-
tively high in regions with net commuter inflows and rela-
tively low in regions with net commuter outflows (see ESA 
2010, par. 13.45).

2.3. Selection of units

2.3.1. Statistical units and residence in the case 
of industries 

of production, enterprises are partitioned into smaller and 
more homogeneous units. These are called kind-of-activity 
units (KAUs). 

The  local  kind-of-activity  unit  (local  KAU)  is  the  part  of 
a  KAU  which  corresponds  to  a  local  unit.  When  a  KAU 
is  engaged  in  production  activities  in  several  regions,  the 
information on the KAU is split in order to obtain regional 
accounts. 

Secondly,  records  for  the  local  KAU  show  flows  occur-
ring  in  the  process  of  production  and  in  the  use  of  goods 
and services (ESA 2010, par. 13.13). For regional accounts, 
depending  on  the  size  of  the  regional  level,  two  types  of 
institutional units can be distinguished: Uniregional units 
and multiregional units.

2.3.1.1. Introduction

2.3.1.2. Uniregional units 

A  feature  of  the  system  is  the  use  of  types  of  unit  corre-
sponding  to  three  ways  of  subdividing  the  economy  (ESA 
2010, par. 2.03):

a.  To  analyse  flows  and  positions,  it  is  essential  to  select 
units which make it possible to study behavioural rela-
tionships among economic agents.

b.  To  analyse  the  process  of  production,  it  is  essential  to 
select units that bring out relationships of a technological-
economic nature, or that reflect local activities.

c.  To allow regional analyses, units that reflect local kinds 

of activity are needed. 

Institutional  units  are  defined  to  meet  the  first  of  these 
objectives.  Behavioural  relationships  as  described  in  (a) 
require  units  reflecting  all  of  their  institutional  economic 
activity. The production processes, technological-economic 
relationships  and  regional  analyses  of  (b)  and  (c)  require 
units such as local kind-of-activity units (local KAUs). 

Two  types  of  unit  are  distinguished  for  the  national 
economy.  Firstly,  records  for  the  institutional  unit  reflect 
flows  affecting  income,  capital  and  financial  transactions, 
other flows and balance sheets. Enterprises are an example 
of an institutional unit. A characteristic of enterprises is that 
they can engage in production activities at more than one 
location, and for regional accounts it is necessary to allocate 
the activities to location. Where enterprises are partitioned 
by location, the partitioned parts are called local units.

Institutional units can be classified on the basis of economic 
activities,  describing  the  economy’s  production  activities 
by  industry.  This  results  in  heterogeneous  industries,  as 
many enterprises have substantial secondary activities that 
are  different  from  their  principal  activity.  It  also  results 
in  some  industries  having  the  principal  product  of  the 
industry as a small proportion of total output. In order to 
obtain groups of producers whose activities are more homo-
geneous in terms of output, cost structure and technology 

Uniregional units are units for which the centre of predomi-
nant economic interest is in one region.

Examples of uniregional units are: households; unincorpo-
rated  enterprises;  corporations  whose  local  KAUs  are  all 
located in the same region; most local and regional govern-
ments; part of social security; and some non-profit institu-
tions  serving  households  (NPISH).  All  their  transactions 
are allocated to the region in which they are resident. 

2.3.1.3. Multiregional and heterogeneous units 

Multiregional  units  are  units  for  which  the  centre  of 
predominant economic interest is in more than one region. 
Corporations  and  NPISH  are  examples  of  units  which 
can  span  regions.  Other  examples  are  institutional  units 
whose  activities  span  the  whole  country,  such  as  central 
government and a small number of corporations exercising 
monopolies or near-monopolies.

With regard to available data for regionalisation of activities 
of  industries,  two  main  possible  situations  can  be  distin-
guished:

1.  Full data for the local KAUs can be provided. No prob-
lems  arise;  the  compilation  of  aggregates  by  industry 
and their correct regional allocation is straightforward.

2.  Full  information  exists  only  at  enterprise  level.  The 
regional data have to be estimated for all enterprises or 
KAUs with local KAUs in different regions. 

2.3.1.4. Ancillary units and activities 

If  an  establishment  undertaking  only  ancillary  activities 
is statistically observable, in that separate accounts for the 
production it undertakes are readily available, or if it is in 
a geographically different location from the establishments 
it  serves,  it  is  recorded  as  a  separate  unit  and  allocated  to 
the  industrial  classification  corresponding  to  its  principal 
activity,  in  both  national  and  regional  accounts.  In  the 

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General basis for regional accounts 2

Heterogeneous

Enterprise

Homogeneous

KAU

KAU

Local unit

Ancillary unit

Local

Local KAU

Local KAU

Supporting 
activity

absence  of  suitable  basic  data  being  available,  the  output 
of the ancillary activity is estimated by summing costs (see 
ESA 2010, par. 1.31 and 13.23).

Production transactions between local KAUs which belong 
to  the  same  institutional  unit  and  which  are  located  in 
different  regions  are  recorded.  However,  no  delivery  of 
ancillary output between local KAUs is recorded, unless it is 
observable (see ESA 2010, par. 1.31 and 13.23). This implies 
that  deliveries  of  principal  or  secondary  output  between 
local KAUs are only recorded, so far as this is practiced in 
national accounts.

2.3.1.5. Units without permanent labour or fixed location

When defining a local KAU there are three distinct cases 
(see ESA 2010, par. 13.21):

a.  A production activity with significant labour input at a 
fixed location. Significant labour input, in this context, 
is  at  a  minimum  the  yearly  equivalent  of  one  person 
regularly  working  half  a  day.  Capital  productivity  is 
probably high in these cases and has to be reflected in 
the regional data.

b.  A  production  activity  without  significant  labour  input 
at  a  fixed  location  is  generally  not  to  be  considered  as 
a  separate  local  KAU  and  the  production  should  be 

attributed to the local unit responsible for managing this 
production. However, there may be some exceptions to 
this  case,  examples  being  windmills,  the  extraction  of 
oil and gas, internet hubs and mobile phone networks. 
These production activities may be located in one region 
and fully managed in a different region. This case will be 
discussed below.

c.  For  a  production  activity  without  a  fixed  location  the 
concept  of  residence  (see  ESA  2010,  par.  2.04)  at  the 
national  level  is  applied.  For  example,  major  construc-
tion  projects  undertaken  by  contractors  from  other 
regions  are  registered  as  a  separate  local  KAU.  Exam-
ples of major construction projects are building bridges, 
dams and power stations, which take a year or more to 
complete and are managed through a local site office. For 
construction projects of less than a year, the residence of 
the parent construction company is used to allocate the 
production by region.

GFCF in fixed assets should be recorded in the same region 
as the associated output and value added. The sites may or 
may not be considered as notional units. The main problem 
is  acquiring  regional  indicators  that  reflect  the  output  of 
these  (notional)  ‘units’.  This  is  especially  the  case  in  the 
construction industry.

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Discussions in the taskforce produced the following conclu-
sions.

For GFCF and GVA the following rules apply:

1.  GFCF and GVA have to be measurable in practice.

2.  GFCF  must  be  used  for  production  for  more  than  one 

year.

3.  Tools which are not considered as GFCF are included in 

intermediate consumption.

4.  GFCF will be allocated to regions according to the owner 
principle, i.e. where the owner uses the capital goods.

5.  GVA  and  associated  GFCF  should  be  allocated  to  the 

same region.

6.  Regarding insignificant activities, no notional unit will 
be  distinguished.  This  implies  that  both  GFCF  and 
GVA are allocated to the local units which manage the 
activity. 

On the basis of these principles we arrive at the following 
conclusions:

1.  Windmills,  plants  for  solar  collection  and  the  extrac-
tion of oil and gas fall within rules 1, 2, 4 and 5. Some 
observations (and probably practical limitations) can be 
made:

 — There might be different enterprises for the produc-
tion, the exploitation of the network and the distri-
bution and trade of electricity and gas. The problem 
of units without significant labour at a fixed location 
relates  mainly  to  the  production  of  electricity,  the 
extraction of oil and gas, and the exploitation of the 
network for electricity and gas.

 — Electricity, oil and gas production are carried out by 
mainly  larger  enterprises,  though  unincorporated 
enterprises (for example farmers) sometimes produce 
electricity  as  a  secondary  (not  main)  activity.  The 
value added of the latter producer should be shown 
in the GVA and GFCF of the agricultural industry. 

 — The  larger  enterprises  in  electricity  production  can 
produce  electricity  by  nuclear  power,  coal  and  gas, 
hydro  installations  or  windmills.  This  implies  that 
these  enterprises  should  make  data  available  about 
the regional distribution of output and intermediate 
consumption  which  are  principally  based  on  their 
inputs and different production processes.

 — The  rules  for  multiregional  enterprises  (production 
units, ancillary units and head offices) apply gener-
ally for the larger enterprises. The A, B and C-classi-
fication to determine suitable methods for the allo-
cation of GVA to these units should be applied (see 
par. 3.9).

 — There remains an environmental argument for allo-
cating the extraction of oil and gas and the produc-
tion of electricity and gas of unmanned stations to the 
physical  place  of  production.  The  environment  has 
by  definition  a  regional  dimension.  Allocating  the 
aforementioned  economic  activities  to  the  produc-
tion location enhances the potential for the analysis 
of regional economic and environmental effects.

2.  With regard to internet hubs and mobile phone networks 
some  observations  can  be  made  about  the  significance 
and measurability of the activity: 

 — Theoretically  one  could  argue  that  the  enterprises 
can only create value added by a network of antennas 
or internet hubs which give the customers in a region 
access to the mobile telephone network or internet. 
This  implies  that  the  production  takes  place  where 
the antennas or hubs are situated. The antenna and 
hub  could  be  seen  as  a  production  unit  without 
significant labour input. The production would be a 
function of capital (the antenna or hub) and the use 
of  the  network  by  the  customers,  which  equates  to 
the  output  of  the  network.  However,  it  is  doubtful 
that this approach is feasible and in line with previ-
ously mentioned rules of ESA 2010. 

 — For  each  separate  antenna,  one  could  say  that  its 
activity  is  insignificant  in  relation  to  the  activity 
of  the  total  network  of  all  antennas.  To  get  a  full 
coverage for a mobile phone network many antennas 
are  required.  Next  to  that,  the  investment  value  of 
one  antenna  is  relatively  low  and  is  in  many  cases 
completely hidden in for example signposts and bill 
boards. 

 — It  might  be  questioned  whether  the  enterprises  in 
this  communication  industry  can  or  will  provide 
monetary or physical indicators to allocate GVA of 
these  industries  to  the  regions  where  the  antennas 
or  internet  hubs  are  situated.  This  is  relevant,  for 
most  communication  enterprises  do  not  only  have 
this type of output, but are generally also involved in 
other activities.

 — Based  on  the  factors  of  significance  and  measur-
ability, GVA of the mobile network or internet hubs 
should be allocated to the unit responsible for their 
management. This rule is completely in line with the 
treatment  of  fixed  networks  by  cables.  In  that  case 
GVA  is  allocated  to  the  units  responsible  for  the 
management of the network.

2.3.1.6. Head offices 

Head offices are institutional units. A head office is a unit 
that exercises managerial control over its subsidiaries. Head 
offices are allocated to the dominant non-financial corpora-
tions sector of their subsidiaries, unless all or most of their 

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General basis for regional accounts 2

subsidiaries are financial corporations, in which case they 
are  treated  as  financial  auxiliaries  (S.126)  in  the  financial 
corporations sector.

Where the head office undertakes business production and 
this business activity is predominant, the head office is clas-
sified to the corresponding industry. This class includes: the 
management  of  other  units  of  the  company  or  enterprise; 
undertaking  strategic  or  organisational  planning  and  the 
decision-making  role  of  the  company  or  enterprise;  and 
exercising  operational  control  and  managing  the  day-to-
day operation of their related units. The basic rule is that the 
head offices have to be described in a separate activity under 
NACE  Rev. 2,  M 70.10. However it is not certain that this 
will be practised in the national accounts. 

The  main  rule  for  regional  accounts  is  that  the  data  have 
to  add  up  to  the  corresponding  national  accounts  data. 
This  implies  that  if  head  offices  are  described  in  national 
accounts  under  the  heading  of  NACE  Rev.  2,  division  M 
70.10,  regional  accounts  have  to  follow  that.  If  the  head 
office is not separately distinguished from its subsidiaries, 
regional accounts also have to follow the industry classifica-
tion given in the national accounts. The regional allocation 
of value added will be discussed in par. 4.3.1.

2.3.2. Statistical units and residence in the case 
of households 

2.3.2.1. Definition

‘A household is an institutional unit’. In ESA 2010, par. 2.12 
such a unit is defined as follows:

‘An  institutional  unit  is  an  economic  entity  character-
ised by decision-making autonomy in the exercise of its 
principal function. A resident unit is regarded as consti-
tuting an institutional unit in the economic (9) territory 
where it has its centre of predominant economic interest 
if  it  has  decision-making  autonomy  and  either  keeps  a 
complete set of accounts, or is able to compile a complete 
set of accounts.’

ESA 2010, par. 2.13a also states that:

‘Households are deemed to enjoy autonomy of decision 
in respect of their principal function and are therefore 
institutional  units,  even  though  they  do  not  keep  a 
complete set of accounts.’

Households as consumers may be defined as small groups of 
people who share the same living accommodation, who pool 
some or all of their income and wealth and who consume 
certain  types  of  goods  and  services  collectively,  mainly 
housing and food. The criteria of the existence of family or 
emotional ties may be added.

The principal resources of households are the following:

a.  Compensation of employees.

b.  Property income.

c.  Transfers from other sectors.

d.  Receipts from the disposal of market products.

e.  Imputed  receipts  from  the  output  of  products  for  own 

final consumption.

2.3.2.2. The household sector

ESA 2010, par.  2.118: ‘The household sector  (S.14) consists 
of  individuals  or  groups  of  individuals  as  consumers  and 
as entrepreneurs producing market goods and nonfinancial 
and financial services (market producers) provided that the 
production of goods and services is not by separate entities 
treated as quasi-corporations. It also includes individuals or 
groups of individuals as producers of goods and non-finan-
cial services for exclusively own final use.’

ESA 2010, par. 2.119: ‘The household sector includes:

a.  Individuals  or  groups  of  individuals  whose  principal 

function is consumption.

b.  Persons  living  permanently  in  institutions  who  have 
little or no autonomy of action or decision in economic 
matters  (e.g.  members  of  religious  orders  living  in 
monasteries,  long-term  patients  in  hospitals,  prisoners 
serving long sentences, old persons living permanently 
in retirement homes). Such people are treated as a single 
institutional unit: a single household.

c.  Individuals  or  groups  of  individuals  whose  principal 
function  is  consumption  and  that  produce  goods  and 
non-financial  services  for  exclusively  own  final  use. 
Only two categories of services produced for own final 
consumption  are  included  within  the  system:  services 
of  owner-occupied  dwellings  and  domestic  services 
produced by paid employees.

d.  Sole  proprietorships  and  partnerships  without  legal 
status  other  than  those  treated  as  quasi-corporations, 
which  are  market  producers.  The  production  of  goods 
and  services  by  these  unincorporated  enterprises 
(market enterprises owned by households) is described 
in the household sector. Such enterprises have no assets 
or autonomy of decision-making separate from those of 
their owner. No distinction is made between them and 
the owners’ household, which is an institutional unit in 
the household sector.

e.  Non-profit institutions serving households, which do not 
have independent legal status or those which do but are of 
only minor importance’ (see ESA 2010, par. 2.1302).

(9)  ESA 2010, par. 13.51 states the following: ‘The regional household accounts are based 

on the households that are resident in a regional territory. This implies that it is assumed 
that there are no households and thus population in the extra-regio territory.’

In  ESA  2010,  the  household  sector  is  subdivided  into  the 
following sub-sectors:

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a.  Employers (S.141) and own-account workers (S.142).

The  sub-sector  ‘employers  and  own-account  workers’ 
consists  of  the  group  of  households  for  which  the 
(mixed) incomes (B.3) accruing to the owners of house-
hold  unincorporated  enterprises  from  their  activity  as 
producers of market goods and services, with or without 
paid employees, are the largest source of income for the 
household  as  a  whole,  even  if  it  does  not  account  for 
more than half of total household income.

b.  Employees (S.143).

The  sub-sector  ‘employees’  consists  of  the  group  of 
households  for  which  the  income  accruing  from 
compensation of employees (D.1) is the largest source of 
income for the household as a whole.

c.  Recipients of property income (S.1441).

The  sub-sector  ‘recipients  of  property  income’  consists 
of the group of households for which property income 
(D.4) is the largest source of income for the household 
as a whole.

d.  Recipients of pensions (S.1442).

The  sub-sector,  ‘recipients  of  pensions’,  consists  of  the 
group  of  households  for  which  the  income  accruing 
from  pensions  is  the  largest  source  of  income  for  the 
household as a whole.

e.  Recipients of other transfers (S.1443).

The  sub-sector  ‘recipients  of  other  transfer  incomes’ 
consists of the group of households for which the income 
accruing  from  other  current  transfers  is  the  largest 
source  of  income  for  the  household  as  a  whole.  Other 
current  transfers  are  all  current  transfers  other  than 
property  income,  pensions  and  the  income  of  people 
living permanently in institutions.

Households  are  allocated  to  sub-sectors  according  to  the 
largest  income  category  (employers’  income,  compensa-
tion of employees, etc.) of the household as a whole. When 
more than one income of a given category is received within 
the same household, the classification is based on the total 
household income within each category.

2.3.2.3. Residence of households

ESA  2010,  par.  13.15:  ‘All  transactions  of  the  uniregional 
institutional units are allocated to the region in which they 
have  their  centre  of  predominant  economic  interest.  For 
households,  the  centre  of  predominant  economic  interest 
lies  in  the  region  where  they  are  resident,  not  the  region 
where they work.’

itself,  even  though  they  may  cross  borders  to  work  or 
otherwise spend periods of time abroad. If they work and 
reside abroad so long that they acquire a centre of economic 
interest abroad, they cease to be members of their original 
households.’

SNA  2008,  par.  24.17:  ‘All  households  are  resident  in  the 
economy  but  of  increasing  interest  is  the  phenomenon 
of  a  person  abroad,  often  but  not  necessarily  a  family 
member,  who  remits  significant  amounts  to  the  family 
in  the  domestic  economy.  (The  same  phenomenon  also 
exists within a country, between urban and rural areas, for 
example.) The aspect of people moving abroad in response 
to better employment prospects may be seen as another facet 
of globalization and one that deserves to be monitored.’ This 
paragraph is especially relevant for measuring the current 
transfers between households (see ESA 2010, par. 4.129).

A member of a resident household who leaves the economic 
territory  but  returns  to  that  same  household  within  one 
year continues to be a resident even if that individual makes 
frequent journeys outside the economic territory. The indi-
vidual’s centre of economic interest remains in the economy 
in which the household is resident (SNA 2010, par. 26.38). 

All the following categories of such individuals are treated 
as residents; the illustrations of the categories are adapted 
for regional purposes:

a.  Travellers or visitors, i.e. individuals who leave the region 
for  less  than  one  year  for  recreation,  business,  health, 
education (see point g), religious or other purposes.

b.  Workers who work for part of the year in another region 
or  country,  in  some  cases  in  response  to  the  varying 
seasonal  demand  for  labour,  and  then  return  to  their 
households.

c.  Workers  who  regularly  cross  the  border  of  the  region 
or  country  where  they  live  each  day  or  somewhat  less 
regularly (e.g. each week or month) to work in a neigh-
bouring region or country.

d.  The  official,  civilian  or  military  representatives  of  the 
government  of  a  country  established  in  territorial 
exclaves. They are considered to have their residence in 
the  economic  territory  of  the  home  country  (see  ESA 
2010, par. 2.10 and 13.51). However, disposable income 
of these representatives in the extra-regio territory will 
not be compiled (see par. 10.1). 

e.  The recruited staff of foreign embassies, consulates, mili-
tary bases, etc. reside in the region where the households 
to which they belong maintain their dwellings.

SNA  2008,  par.  4.15:  ‘The  residence  of  individual  persons 
is determined by that of the household of which they form 
part  and  not  by  their  place  of  work.  All  members  of  the 
same household have the same residence as the household 

f.  The  crews  of  ships,  aircraft,  or  other  mobile  equip-
ment operating partly, or wholly, outside the region or 
country, reside in regions where the households to which 
they belong maintain their dwellings.

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g.  People  who  go  abroad  for  full-time  study  generally 
continue  to  be  resident  in  the  territory  in  which  they 
were  resident  prior  to  studying  abroad.  This  treatment 
is adopted even though their course of study may exceed 
a year. However, students become residents of the terri-
tory  in  which  they  are  studying  when  they  develop  an 
intention  to  continue  their  presence  in  the  territory  of 
study  after  the  completion  of  the  studies.  Members  of 
the same household who are accompanying dependents 
of  students  are  also  considered  to  be  residents  of  the 
same  economy  as  the  student.  Patients  who  go  abroad 
for  the  purpose  of  medical  treatment  maintain  their 
predominant centre of interest in the territory in which 
they were resident prior to the treatment, even in the rare 
cases where complex treatments take a year or more. As 
with students, accompanying dependents are treated in 
the same way. 

An  exception  could  be  envisaged  at  the  regional  level, 
whereby  these  students  and  patients  would  be  treated  as 
residents of the host region, if the host region is in the home 
country and when they stay there more than one year (ESA 
2010, par. 13.52).

2.3.2.4. Notional households’ units and their residence

ESA  2010,  par.  18.15:  ‘When  land  located  in  a  territory  is 
owned  by  a  non-resident  entity,  a  notional  unit  that  is 
treated  as  resident  is  identified  for  statistical  purposes  as 
being the owner of the land. This notional resident unit is 
a  quasi-corporation.  The  notional  resident  unit  treatment 
is also applied to associated buildings, structures and other 
improvements on that land, leases of land for long periods, 
and  ownership  of  natural  resources  other  than  land.  As  a 
result  of  this  treatment,  the  non-resident  is  owner  of  the 
notional resident unit, rather than owning the land directly, 
so  there  is  an  equity  liability  to  the  non-resident,  but  the 
land  and  other  natural  resources  are  always  assets  of  the 
economy  in  which  they  are  located.  The  notional  resident 
unit  usually  supplies  services  to  its  owner,  for  example 
accommodation in the case of vacation homes.’

ESA 2010, Par. 2.13f: ‘Quasi-corporations are entities which 
keep  a  complete  set  of  accounts  and  have  no  legal  status. 
They  have  an  economic  and  financial  behaviour  that  is 
different  from  that  of  their  owners  and  similar  to  that  of 
corporations. They  are  deemed  to  have  autonomy  of  deci-
sion and are considered as distinct institutional units.’

Two examples of these units are:

1.  A household which owns an unincorporated enterprise 
in  another  country  or  a  region  other  than  the  region 
where it lives. Two different situations arise:

a.   A household owns an unincorporated enterprise in 

another country:

ESA 2010, par. 2.09: ‘A resident institutional unit may 
be a notional resident unit, in respect of the activity 
conducted in the country for a year or more by a unit 
which is resident in another country.’ 

According  to  ESA  2010,  par.  2.13f,  these  units  are 
treated as if they were quasi-corporations. Therefore 
for the household sector the income received by the 
owner has to be counted as income withdrawn from 
quasi-corporations (property income) transferred to 
its owner in the home region.

b.   A household owns an unincorporated enterprise in 

another region of the home country:

The unincorporated enterprise is a resident (notional 
unit)  of  the  host  region  and  in  this  case  belonging 
to the household sector. The income received by the 
owner  has  to  be  counted  as  mixed  income  trans-
ferred  to  its  owner  in  the  home  region.  This  rule 
ensures  coherence  between  national  and  regional 
accounts of households.

2. 

 A  household  owns  land  and/or  a  second  dwelling  in 
another country or a region other than the region where 
it lives. Again two different situations arise:

a.  A household owns land and/or a second dwelling in 

another country:

Land and/or second dwellings are non-resident units 
(notional units of the foreign country). The produc-
tion of housing services (rented or owner-occupied) 
has  to  be  allocated  to  the  notional  unit.  For  the 
household sector, the income received by the owner 
has to be counted as property income transferred to 
its owner in the home region.

b.  A household owns land and/or a second dwelling in 

another region of the home country:

Land  and/or  second  dwellings  are  non-resident 
(notional) units of the region where they are located. 
For the household sector, the income received by the 
owner has to be counted as property income (from 
land)  and  operating  surplus  for  owner-occupied 
dwellings and rented dwellings (SNA 2008, par. 7.9), 
transferred to the home region.

These  two  situations  also  have  to  be  considered  when  a 
household,  non-resident  in  the  home  country,  owns  land, 
dwellings  or  unincorporated  enterprises  (treated  as  quasi-
corporations) in a region of the home country. The imputa-
tion  rules  mentioned  above  have  to  be  applied  and  there-
fore these units do not belong to the household sector of the 
home country.

  Manual on regional accounts methods

29

Methods of regionalisation 

3.  Methods of 

regionalisation 

3

3

Methods of regionalisation 

3.1. Introduction 

ESA 2010, par. 13.24: ‘Regional accounts are based on trans-
actions  of  units  that  are  resident  in  a  regional  territory.’ 
In  the  case  of  regional  accounts  by  industry,  data  have  to 
include  the  transactions  and  residence  of  the  local  KAUs 
and in the case of households, data include the transactions 
and residence of the households. 

It  is  self-evident  that  source  statistics  are  needed  for  both 
national  and  regional  accounts.  For  the  regional  accounts 
by industry, data regarding their GVA, employment, wages 
and  salaries,  and  GFCF  need  to  be  founded  on  the  local 
KAU.  Regional  prices  are  needed  for  the  constant  price 
compilation of regional GVA. For the regional accounts of 
households, especially for an estimate of regional consump-
tion expenditure of households and social transfers in kind, 
reliable regional data are necessary. 

The  main  problem  of  the  regional  accounts  by  industry  is 
that the source statistics are frequently designed for national 
and not for regional purposes. For instance, the Structural 
Business Statistics (SBS) (10) are based on the statistical unit 
‘enterprise’ and not the ‘local KAU’ upon which the national 
and regional accounts by industry should be based. 

The same is true for the regional accounts of households. For 
instance, family expenditure surveys are generally designed 
to obtain accurate national estimates and not regional esti-
mates.  That  is  why  family  expenditure  surveys  in  many 
countries often cannot be used for estimating the regional 
distribution of the consumption expenditure of households.

Therefore the regional accounts methodology has to focus 
on data that can be used as regional indicators for the esti-
mates of value added etc. where no direct regional data are 
available  and  also  has  to  focus  on  preferred  methods  of 
regionalisation for both final and provisional estimates. 

3.2. Data required for regionalisation 

3.2.1. Regional accounts by industry 

The regional accounts by industry require source data that 
enable the compilation of data on:

1.  GVA  at  basic  prices  in  current  prices  at  NUTS  2  and 

NUTS 3 level. 

2.  GVA  in  basic  prices  in  prices  of  the  previous  year  at 

NUTS 2 level. 

3.  Growth rate of GVA at NUTS 2 level.

4.  Compensation of employees in current prices at NUTS  2 

level.

(10) Regulation (EC) No 295/2008 of the  European Parliament and of the Council of 

11 March 2008 concerning structural business statistics (recast).

5.  Total employment at NUTS 2 and NUTS 3 level.

6.  Total employment in hours worked at NUTS 2 level.

7.  Total  number  of  employees  at  NUTS  2  and  NUTS  3 

level.

8.  Total number of hours worked by employees at NUTS  2 

level.

GVA  at  basic  prices  can  be  compiled  according  to  the 
following definitions:

1.  GVA (basic prices) = output at basic − prices  interme-

diate consumption at purchasers’ prices.

2.  GVA  (basic  prices)  =  other  taxes  less  subsidies  on 
production  +  compensation  of  employees  +  consump-
tion of fixed capital + net operating surplus / net mixed 
income.

For market-oriented activities the first approach is predom-
inant.  This  is  called  the  production  approach.  The  SBS 
are  the  main  source  for  this  approach,  but  administra-
tive  sources  are  also  used.  For  non-market  activities  the 
second approach is predominant. This is called the income 
approach.  General  governments’  value  added  and  other 
non-market services, such as health activities, can only be 
compiled using the income approach. The regional dimen-
sion  of  these  sources  for  multiregional  units  is  the  main 
problem  for  which  regional  indicators  have  to  be  used  for 
the regional allocation of GVA. The income approach will 
generally be applied for the regional allocation of GVA for 
multiregional  enterprises.  Annual  reports  of  the  multire-
gional enterprises might provide useful information for the 
regional allocation of value added.

The  main  problem  of  the  income  approach  is  the  meas-
urement  of  consumption  of  fixed  capital.  The  valuation 
of  consumption  of  fixed  capital  is  (according  to  national 
accounts  concepts)  at  purchasers’  prices  of  the  current 
period, which is equivalent to replacement values according 
to  bookkeeping  concepts  (see  ESA  2010,  par.  3.141). 
However,  enterprises  generally  do  not  apply  the  valua-
tion  of  consumption  of  capital  according  to  replacement 
prices.  Instead  enterprises  generally  use  historic  prices  to 
compile depreciation of capital. This concept is unsuitable 
for  national  and  regional  accounts’  purposes.  Enterprises 
are unlikely to be able to provide information on consump-
tion of fixed capital at purchasers’ prices. This is the main 
reason why national accounts apply the Perpetual Inventory 
Method  (PIM)  which  assumes  long  time  series  of  GFCF, 
which  however  are  not  (yet)  available  at  the  regional  level 
(see ESA 2010, par. 3.141). 

Compensation of employees consists of wages and salaries 
(D.11) and employers’ social contributions (D.12). This infor-
mation is generally available in the SBS, and administrative 
records of government administrations. However, multire-
gional  units  might  not  have  this  information  available  for 

32

Manual on regional accounts methods  

their local KAUs. The regional allocation of compensation 
of employees has to be based on employment as an indicator. 
The Labour Force Survey (LFS) might provide some addi-
tional information at NUTS 2 level. The LFS is a household-
based survey and thus linked to the residence of the house-
holds. The LFS however also provides data on the region of 
the  workplace  (at  NUTS  2  level)  of  the  surveyed  persons. 
This information is considered less reliable and is generally 
only available at a high level of industry aggregation.

Generally  speaking,  regional  information  is  available  in 
greater detail for employment than for value added, compen-
sation of employees and employment in hours worked. That 
is  why  employment  is  mainly  used  as  an  indicator  for  the 
regional  allocation  of  related  variables.  In  par.  4.3  we  will 
discuss the dangers of such an approach. Regional data will 
be based on SBS, administrative records and the LFS (with 
previously mentioned restrictions). 

For  compilation  in  prices  of  the  previous  year,  it  would 
be  highly  preferable  to  use  regional  prices.  In  the  case  of 
regional  accounts  by  industry  this  would  mainly  consist 
of  regional  producer  prices  in  relation  to  output  at  basic 
prices and purchasers’ prices in relation to the inputs. For 
the income approach it is conceptually impossible to collect 
prices on net operating surplus or net mixed income. This 
implies  that  the  income  method  is  not  convenient  for  the 
compilation  of  GVA  in  prices  of  the  previous  year.  In  a 
Supply  and  Use  table  or  the  production  approach,  the 
compilation of net operating surplus or net mixed income 
in  prices  of  the  previous  year  would  result  as  a  balancing 
item. Regional accounts by industry however are not based 
on regional Supply and Use tables.

Most EU countries do not collect regional prices because of 
the burden on both enterprises and statistical offices. This 
implies that assumptions have to be made for the compila-
tion of GVA in prices of the previous year and consequently 
for the estimation of the volume growth of GVA. 

Growth rates of regional total GVA  are defined as: 

Total GVA (t) in average prices  
of the previous year 

(                               )

Total GVA (t−1) in current prices

* 100 − 100

The compilation of the volume growth rates has to be based 
on detailed industry GVA data (at least NACE Rev. 2 divi-
sion, A*38 and preferably A*64 or even in some cases 3 or 
4-digit  level)  and  preferably  using  double  deflation.  See 
chapter 6 for more detailed information.

3.2.2. Regional data on GFCF by industry 

ESA  2010,  par.  3.24:  ‘GFCF  (P.51)  consists  of  resident 
producers’  acquisitions,  less  disposals,  of  fixed  assets 
during a given period plus certain additions to the value of 
non-produced  assets  realised  by  the  productive  activity  of 
producer or institutional units.’ 

Methods of regionalisation  3

Fixed  assets  are  produced  assets  used  in  production  for 
more  than  one  year.  Regional  data  on  GFCF  by  industry 
(A*10) are required at NUTS 2 level. A breakdown by type 
of  assets  is  not  currently  required  by  Eurostat.  However, 
for  reasons  of  statistical  plausibility  it  is  recommended  to 
take the type of assets into account in the compilation of the 
GFCF by industry data.

ESA  2010,  par.  3.127:  The  following  types  of  GFCF  are 
distinguished:

1.  Dwellings.

2.  Other  buildings  and  structures;  this  includes  major 

improvements to land.

3.  Machinery  and  equipment,  such  as  ships,  cars  and 

computers.

4.  Weapons systems.

5.  Cultivated biological resources, e.g. trees and livestock.

6.  Costs  of  ownership  transfer  on  non-produced  assets, 

such  as land, contracts, leases and licences.

7.  Research and development (R&D), including the produc-
tion of freely available R&D. Expenditure on R&D will 
only  be  treated  as  fixed  capital  formation  when  a  high 
level of reliability and comparability of the estimates by 
the EU Member States has been achieved. 

8.  Mineral exploration and evaluation. 

9.  Computer software and databases.

10. Entertainment, literary or artistic originals.

11. Other intellectual property rights.

ESA 2010, par. 3.129: GFCF includes the following border-
line cases:

1.  Acquisitions  of  houseboats,  barges,  mobile  homes  and 
caravans used as residences of households and any asso-
ciated structures such as garages.

2.  Structures and equipment used by the military.

3.  Light weapons and armoured vehicles used by non-mili-

tary units.

4.  Changes in livestock used in production year after year, 
such  as  breeding  stock,  dairy  cattle,  sheep  reared  for 
wool and draught animals.

5.  Changes in trees that are cultivated year after year, such 

as fruit trees, vines, rubber trees, palm trees etc.

6.  Improvements to existing fixed assets beyond ordinary 

maintenance and repairs.

7.  The acquisition of fixed assets by financial leasing.

8.  Terminal costs, i.e. large costs associated with disposal, 
e.g. decommissioning costs of nuclear power stations or 
clean-up costs of landfill sites.

  Manual on regional accounts methods

33

 
        
3

Methods of regionalisation 

GFCF  excludes  transactions  included  in  intermediate 
consumption,  transactions  recorded  as  changes  in  inven-
tories,  durables  acquired  for  final  consumption  by  house-
holds, holding gains and losses of fixed assets, catastrophic 
losses on fixed assets and funds set aside or put in reserve 
(see ESA 2010, par. 3.130). 

GFCF by industry is based on investment statistics, general 
government  administrations,  other  non-market  service 
industries (such as the health industry) and annual admin-
istrative reports, in which the regional dimension, at least at 
NUTS level 2, is essential. The EU SBS does provide invest-
ment  data,  however  not  with  a  regional  specification  on  a 
compulsory  basis  and,  when  available,  only  for  tangible 
goods.

3.2.3. Regional accounts of households 

ESA 2010, par. 13.50: ‘Regional accounts of households are a 
regional specification of the corresponding accounts at the 
national  level.’  Regional  household  accounts  are  required 
at  NUTS  2  level.  In  principle  there  are  no  conceptual 
constraints to compiling a complete set of regional accounts 
of  households,  namely:  the  production  account  with  GVA 
as  balancing  item;  the  generation  of  income  account  with 
gross/net operating surplus and mixed income as balancing 
items;  the  allocation  of  primary  income  account  with  net 
primary income as balancing item; the secondary distribu-
tion of income account with gross/net disposable income as 
balancing item; the use of income account with net saving 
as balancing item and final consumption expenditure as a 
highly relevant transaction; and the capital account with net 
lending or net borrowing as balancing item.

on nationally designed samples, are sufficiently reliable 
at the regional NUTS 2 level or even at the NUTS 1 level.

The  compilation  of  the  allocation  of  primary  income 
account and the secondary distribution of income account 
are  generally  based  on  administrative  data  from  the  tax 
authorities. The personal income distribution might also be 
based  on  this  source.  Other  specific  sources  may  be  used, 
e.g. housing surveys, regional accounts for agriculture etc. 
It is not recommended to derive income transactions from 
household  surveys  such  as  the  family  expenditure  survey. 
It  is  well  known  (11)  that  these  surveys  generally  underes-
timate income and result in an underestimation of house-
hold  savings.  Moreover,  samples  of  family  expenditure 
surveys are generally designed for national and not regional 
purposes, probably leading to large sampling errors at the 
regional level.

3.3. Methods of regionalisation 

Having outlined the general basis of the regional accounts 
regarding  regional  territory,  NUTS,  residence,  statistical 
units and the data required for regionalisation, we now turn 
our  attention  to  the  methods  used  for  estimating  GVA  in 
current  and  constant  prices,  employment,  GFCF,  primary 
and  (adjusted)  disposable  income  of  households  and  final 
consumption expenditure of households. 

For various reasons, Member States use different methods, 
which do not necessarily affect the quality or comparability 
of  the  figures.  However,  some  general  conclusions  can  be 
drawn about the choice of methods and their accuracy.

There are however practical constraints:

3.3.1. Bottom-up methods 

1.  The  production  account  of  households  relates  to  the 
unincorporated  enterprises  which  are  not  regarded  as 
quasi-corporations.  This  would  imply  that  the  house-
hold  sub-sectors  Employers  (S.141)  and  Own-account 
workers  (S.142)  have  to  be  distinguished.  Statistics 
for  these  sub-sectors  are  generally  based  on  samples 
designed for national purposes, with lower accuracy at 
the regional level as a result. 

2.  The  generation  of  income  account  of  households  will 

also not be compiled.

3.  The  use  of  (adjusted)  income  account  is  intended  to 
be  compiled  (on  a  voluntary  basis)  for  all  households 
(see  par.  1.2.5).  The  transactions  in  final  consumption 
expenditure of households and social transfers in kind 
have  to  be  estimated.  Family  expenditure  surveys,  in 
combination with other sources such as regional turn-
over  data  of  retail  trade,  and  government  administra-
tions’ data on social transfers in kind, should be able to 
provide  this  information.  It  is  doubtful  that  data  from 
family  expenditure  surveys,  which  are  generally  based 

The  bottom-up  or  ascending  method  of  estimating  a 
regional  aggregate  involves  collecting  data  at  the  local 
KAU or the residence of households and aggregating these 
values to get a regional total. The method is called ‘bottom-
up’  because  the  elements  for  compiling  the  aggregate  are 
directly collected at the local KAU level or residence of the 
households. This method can be used for uniregional enter-
prises or KAUs and households if full information is avail-
able.

A pseudo-bottom-up method can be followed where data 
for the local KAU or residence of households are not avail-
able. Data for the local KAU can be estimated from enter-
prise, KAU or local unit data using regional indicators. The 
estimates can then be aggregated to obtain regional totals 
just as in a purely bottom-up method. This method can be 
used especially for multiregional enterprises or KAUs. 

(11)  See for instance: Are Household Surveys Like Tax Forms: Evidence from Income 

Underreporting of the Self-Employed, Finance and Economics Discussion Series Divisions 
of Research & Statistics and Monetary Aﬀairs Federal Reserve Board, Washington, D.C., 
December 2010.

34

Manual on regional accounts methods  

Methods of regionalisation  3

3.3.2. Top-down methods 

The  top-down  method  accommodates  a  situation  in 
which data are only available at for instance NUTS 3 level 
or  municipality  and  not  for  the  local  KAU  or  local  unit. 
The  national  figure  from  the  national  accounts  is  distrib-
uted using regional data (indicators) which are as close as 
possible to the variable to be estimated. For example wages 
and salaries might be allocated to regions using the regional 
distribution of the total number of full time equivalents of 
employees,  multiplied  by  the  average  annual  earnings  per 
employee from a different statistical source. This results in 
the  regional  distribution  of  total  earnings  of  employees, 
which can be used as a regional indicator for the allocation 
of wages and salaries to regions. 

The  method  is  called  ‘top-down’  because  the  aggregate  is 
allocated to a region and not to the local KAU or local unit. 
However,  the  notion  of  local  KAU  or  local  unit  is  usually 
still needed to produce a correct regional allocation. There-
fore  the  regional  distribution  of  the  total  number  of  full 
time equivalents of employees in the example quoted would 
need to be based on the local KAU or local unit. 

The  notion  of  a  local  KAU  or  local  unit  does  not  always 
underpin  the  estimates,  for  example,  where  the  GVA  of 
rail  passenger  transport  is  allocated  to  regions  according 
to the number of passengers transported in a region. This 
type of method is described as a pseudo-top-down method 
and should be avoided, if possible, because the local KAU 
or local unit is not involved. In other words, the residence 

approach  is  not  applied  in  this  example  but  the  territory 
approach has been applied instead.

3.3.3. Mixed methods 

The  bottom-up  method  is  rarely  encountered  in  its  pure 
form. There are  always gaps in the data, which  have to be 
filled using a pseudo-bottom-up and/or top-down approach. 
Let us take the food industry as a theoretical example. The 
SBS  for  this  industry  is  based  on  enterprises.  The  sample 
design might be as follows:

1. 

2. 

 All uniregional enterprises with 20 or more employees 
are included.

 All multiregional enterprises with 20 or more employees 
are included and there are no small multiregional enter-
prises.

3. 

 A  survey  of  uniregional  enterprises  with  less  than 
20 employees is based on a 5 per cent sample. 

Let us suppose that there is no non-response. For each local 
unit the number of employees is available. If we disregard 
the  accuracy  of  this  estimation,  we  can  distinguish  the 
methods of regionalisation used (see the illustration below 
in par. 3.3.4).

1.  The regionalisation of the large uniregional enterprises 
is based on the bottom-up method (see column 1 in the 
illustration).

Region

Uniregional SBS

Multiregional SBS

Small SBS

Total SBS

Difference total SBS 
 – National Accounts 
Total

Regional totals 
adding up to 
national accounts 
total

All units covered

All units covered

Sample

1

2

3

4

5

6

1

2

–

N

Regional accounts 
total

4+5=6

1+2+3=4

National

National  
uniregional

National  
multiregional

National small

National total SBS

Difference

National accounts 
total

Method

Bottom-up

Pseudo bottom-up

Top-down

Mixed

Top-down

Mixed

  Manual on regional accounts methods

35

3

Methods of regionalisation 

2.  The  regionalisation  of  the  multiregional  enterprises  is 
based on the pseudo-bottom-up method, using regional 
indicators per multiregional unit applied for the region-
alisation of the variables output, intermediate consump-
tion and thus value added (column 2).

3.  The regionalisation of the small enterprises is presum-
ably based on a top-down method, because the limited 
size  of  the  5  per  cent  sample  does  not  enable  accurate 
regionalisation (e.g. of GVA). In this case one might use 
the regional distribution of employees and the national 
GVA estimate of the SBS for small enterprises for esti-
mating the regional distribution of GVA of these enter-
prises (see column 3). 

4.  Regional  estimates  for  uniregional,  multiregional  and 

small enterprises add up to column 4. 

5.  In the end the sum of the regional estimates of SBS has 
to add up to the corresponding national accounts total. 
This might be done by using the regional distribution of 
total GVA of the food industry based on the SBS (column 
4) for the regional allocation of the difference between 
the national accounts GVA of the food industry and the 
comparable national total of SBS, as shown in column 5.

The mixed methods are the norm. This also applies to the 
regional accounts of households.

And:

Compensation  of  employees  +  net  operating  surplus 
+  net  mixed  income  +  consumption  of  fixed  capital 
+  other  taxes  less  subsidies  on  production  =  GVA  at 
basic prices (income approach in block 2)

The main problem of the income approach is the measure-
ment of consumption of fixed capital. If no data are avail-
able  for  consumption  of  fixed  capital  one  has  to  rely  on 
information  from  blocks  3  or  7.  See  for  the  assumptions 
used blocks  3 and 7.

Block  6  defines  the  expenditure  approach.  Because  of  the 
fact that exports to and imports from other regions have to 
be measured, it is difficult to put the expenditure approach 
into practice. The definition is:

Exports  (abroad  and  to  other  regions)  +  consump-
tion  of  households  and  general  government  +  GFCF 
of  households,  enterprises  and  general  government 
+ change in stocks – imports (from abroad and other 
regions) = GDP at market prices.

Block 3 of the diagram represents the idea of a production 
function.  This  can  be  used  to  find  closely  related  indica-
tors for the estimation of regional GVA, when there is no or 
insufficient data available about the two core approaches in 
blocks one and two. The functions are as follows:

3.4. Theoretical concepts for the use of 
indicators for GVA by industry 

GVA by business units is a function of hours worked 
by  employees  and  self-employed  and  labour  produc-
tivity per hour.

There is of course no need to use indicators when compre-
hensive and reliable data about GVA or its components are 
available. When these are unavailable, we look for alterna-
tive  data  that  are  closely  related  to  the  variable  to  be  esti-
mated, in this case value added. A systematic approach may 
help to find a well-founded choice of indicators.

The  diagram  (see  next  page)  consists  of  eight  blocks, 
containing  indicators  on  the  basis  of  which  GVA  can  be 
estimated.  Some  indicators  are  more  closely  related  to 
GVA  than  others.  Blocks  one  and  two  provide  indicators 
for direct estimates of GVA in block zero. The other blocks 
are related in an indirect way, which means that we have to 
assume that there are no regional differences in the factors 
that  influence  the  relationship  between  the  indicator  used 
and GVA. For instance in block 3, where hours worked has 
been used, the same labour productivity per hour worked is 
assumed for all regions. 

The  core  blocks  in  the  diagram  are  blocks  one  and  two. 
Both  contain  the  main  elements  of  the  system  of  national 
and  regional  accounts  regarding  the  generation  of  GVA 
and  the  primary  distribution  of  income,  as  we  have  seen 
in par. 3.2.1:

And:

Labour  productivity  is  a  function  of  the  following 
variables:  the  level  of  education  of  employees  and 
self-employed;  the  efficiency  of  the  organisation;  the 
quality and quantity of the capital stock; and the effi-
ciency of the infra-structure.

These relationships can be established at the level of economic 
production units as well as at the level of economic activi-
ties. For the purpose of national and regional accounts, we 
make  a  distinction  between  estimates  of  the  level  of  GVA 
and the change in GVA.

If  we  use  these  relationships  to  compile  the  level  of  GVA 
for  the  production  units  in  the  same  activity,  we  may 
expect  a  strong  link  between  employed  persons,  number 
of employees or hours worked and the GVA of these units. 
This is only valid if the assumptions or circumstances are 
exactly the same, so we have to verify whether the assump-
tions made are satisfied. 

The first assumption is that the different production units 
have exactly the same relationship between these variables, 
for instance no differences in part-time work. 

Output  −  intermediate  consumption  =  GVA  at  basic 
prices (production approach in block 1)

The second assumption is that there are no differences in 
labour productivity per hour for these production units. 

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Methods of regionalisation  3

Generation and distribution of value added and its variables and related indicators 

Block 3

Block 1

Block 0

Block 2

Block 5

Block 4

Block 8

Business units (could in practice be enterprise, KAU, establishment, local unit or legal or other units)

Households or persons

Production factors

Production process

GVA

Distinction
between
employees
and self 
employed

Jobs

Labour
productivity

Full-time
equivalents

Labour

Hours
worked

Equipment

Intermediate
consumption
(purchase 
prices)

Output
(basic prices)

Gross value
added 
(basic prices)

Capital
productivity

Buildings/
houses

Capital

Land

Block 7

Purchase
of raw
materials
and semi-
manufactured
products
and purchase
of services

Turnover  
of final  
products
and services

Change in 
stocks of raw
materials
and semi-
manufactured
products

Change in 
stocks of 
final 
products

Primary
distribution
of income
received
(place of
living or
administration) 

Compensation
of employees

Net operating
surplus

Net mixed
income

Household
units and
persons

Employees

Self-employed

Commuting

Workplace 
and place 
of living or 
administration
address do not  
coincide

Households/
population

Households/
population

Generation
of income,
paid by
business
units
(workplace)

Compensation
of employees

Net operating
surplus

Net mixed
income

Consumption
of  fixed capital

Other taxes
less subsidies
on production

Block 6

Export

Consumption
by households

Consumption
by government

GFCF by
enterprise

GFCF by
government

GFCF
by households

Change in
stocks

Import

When introducing these relationships for regions, the third 
assumption is that the share of employees in total employ-
ment is the same for each activity in all regions. 

The  fourth  assumption  is  that  workplace  (number  of 
employees and hours worked) and dwelling place (employed 
persons) coincide. 

If these four assumptions are not valid, we have to correct 
this information or consider whether the income approach 
provides sufficient data. Otherwise, we may judge the indi-
cators weaker than the direct estimates in blocks one  and 
two. 

Another  example  in  block  3  is  land.  Data  on  agricultural 
sowed  areas  or  the  number  of  cattle  at  a  certain  date  in 
spring  are  available  from  agricultural  statistical  sources. 
In such cases, we have to assume that the counts in spring 

reflect  the  regional  allocation  of  output.  We  further  have 
to  assume  that  the  ratios  of  intermediate  consumption  to 
output are the same, thus assuming the same GVA per unit 
output.  It  is  obvious  that  crops  lost  due  to  heavy  rainfall 
after  the  spring  counts,  or  swine  fever  in  certain  regions, 
might cause quite different regional distributions than the 
counts in spring indicate.

For  the  estimation  of  changes  in  GVA,  the  assumption  is 
that the relationships mentioned are stable for the periods 
concerned. 

The  relationship  between  labour  and  output  is  weaker 
because of a possibly different organisation of the produc-
tion process. With the same output, production units may 
have  quite  different  inputs.  One  car  factory,  for  instance, 
may purchase more semi-manufactured products or services 
than other car factories. This implies that the output of the 

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number of cars per employee is not a fair indicator of the 
productivity of the production unit. An investigation of the 
Dutch manufacturing industries indicated large differences 
in input-output structure per production unit for almost all 
industries. 

At the distribution of income side in block 2 of the diagram, 
we may only assume a strong relationship between compen-
sation of employees and GVA when the share of compensa-
tion of employees in GVA and the level of compensation is 
the same for all production units and stable for the periods 
concerned. This assumption is also valid for regions. When 
this assumption is not fulfilled we have to make use of the 
component elements of GVA. 

If  information  about  compensation  of  employees  is  avail-
able from the income tax registration (block 4), we have to 
take  into  account  that  there  may  be  a  difference  between 
workplace and place of residence. This implies that we must 
correct for commuting (block 5). 

In block 6 of the diagram, we may distinguish an indirect 
relationship via turnover in block 7 between output and the 
expenditure categories and GVA. We have to be very careful 
with this type of relationship, because of possible changes 
in stocks, the possibility of imports, and possibly different 
regional  ratios  between  intermediate  consumption  and 
output. For instance, the export of certain chemical prod-
ucts can be directed to production units and thus to their 
regions. However, the question remains how much GVA has 
been generated in the region observed. 

Another example is that the consumption of healthcare  is 
assumed to be related to the age distribution of the popula-
tion and the supply is tuned to that demand (block 8). Simi-
larly,  the  output  of  the  construction  of  houses  is  assumed 
to  be  related  directly  to  the  GFCF  in  houses.  Generally 
speaking, such data can only be used in part, for instance to 
check the plausibility of data or to compile provisional data 
for a limited number of industries.

For early estimates about year t, the information is usually 
limited to the following available information: the regional 
structure  of  year  t−1;  provisional  national  estimates  for 
year t; and, in the best cases, developments in the number 
of  employees  for  year  t  compared  to  year  t−1;  turnover  of 
large enterprises; and the development of the population for 
consecutive years. In these cases one has to ensure that the 
indicators  are  suitable  for  estimating  the  definite  regional 
allocation.  For  these  types  of  estimates  the  assumption  of 
stability of structures is essential. If this is not the case, it is 
very hard to achieve accurate results.

In  principle,  the  advantage  of  the  bottom-up  method  is 
that it measures the desired variable directly and allocates 
it  correctly  to  region  and  industry.  Bottom-up  methods 
can produce estimates for any regional level by aggregating 
the  data  appropriately,  while  maintaining  data  confiden-
tiality.  They  can  also  produce  an  alternative  national  esti-
mate, if they are based on sources other than those used for 
the  national  accounts  estimate.  Such  alternative  estimates 
provide  the  opportunity  to  check  the  plausibility  of  both 
national  and  regional  accounts  estimates.  In  practice  it  is 
usually necessary to adjust the regional accounts estimates 
in accordance with the national accounts estimates. This is 
mainly due to national accounts adjustments for balancing 
the data in a Supply and Use framework and estimates for 
the non-observed economy at the national level not usually 
being available in the source statistics on which the regional 
accounts are based.

The  main  disadvantage  of  top-down  methods  is  that  the 
regional  accounts  estimates  are  not  produced  with  direct 
data  but  with  regional  indicators.  The  accuracy  of  these 
estimates  depends  largely  on  whether  the  regional  indica-
tors used reflect the regional phenomenon to be measured. 
As a consequence this manual will focus its attention on a 
proper use of regional indicators. Though it is not a strong 
argument at all, one could say that top-down methods do 
have  the  advantage  that  the  numerical  coherence  between 
national and regional accounts will be guaranteed automat-
ically. These methods may also be cheaper to develop as they 
exploit existing data or can be based on nationwide sample 
surveys  or  administrations  rather  than  requiring  compre-
hensive new registers or annual census-type collections. 

Reliability  can  be  estimated  for  bottom-up  methods. 
Sampling  errors  can  be  measured  and  something  may  be 
known  about  non-sampling  errors  and  the  results  can  be 
checked with the national accounts totals. Where indicators 
have been used in top-down and mixed methods, it is hard 
to  assess  accuracy,  though  an  appropriate  use  of  regional 
indicators can be assessed.

In conclusion, pure bottom-up methods are preferred over 
top-down  methods  and  should  be  the  first  choice.  In  the 
case of multiregional KAUs or enterprises, pseudo-bottom-
up  methods  should  be  used.  Only  in  cases  where  no  reli-
able information at local KAU level exists, should top-down 
methods be used. In such a scenario the emphasis will be on 
the suitability of the regional indicators used.

3.6. Improving pseudo-bottom-up, top-
down and mixed methods 

3.5. Preferred methods of regionalisation 

The  choice  between  bottom-up  and  top-down  methods 
depends mainly on the statistical sources available.

Pseudo-bottom-up,  top-down  and  mixed  methods,  in  the 
case  of  regional  accounts  by  industry,  can  generally  be 
improved by applying the following principles, where data 
permit:

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Manual on regional accounts methods  

Methods of regionalisation  3

Indicators should be as appropriate as possible.

a.  Indicators  should  generally  be  applied  to  components. 
The regionalisation of the components generally applies 
to the application of the income method, for example:

 —  Other  taxes  less  subsidies  on  production.  The 
regional distribution depends highly on the industry 
in question. 

 —  Compensation  of  employees  based  on,  in  order  of 
preference,  the  regional  distribution  of  wages  and 
salaries, hours worked of employees or the number 
of employees. 

 —  Consumption of fixed capital (if available) based on 
depreciation data or data taken from annual reports 
for  bigger  enterprises.  This  is  highly  relevant  for 
multiregional enterprises in capital-intensive indus-
tries, e.g. the chemical industry. 

 —  Net operating surplus/net mixed income. In the case 
of  general  government,  net  operating  surplus  is  by 
definition zero. 

 —  Regionalising  gross  operating  surplus  based  on 
employment  in  capital-intensive  industries  would 
lead  to  an  overestimation  of  value  added  of  the 
regions  where  head  offices,  usually  with  a  lot  of 
staff, are established, generally the regions where the 
capital cities are located. 

b.  Different indicators should be used for components with 

a different regional distribution.

c.  Different indicators can be used at NUTS 1, 2 and 3, if 
that  will  produce  more  accurate  estimates.  Sometimes 
more  accurate  data  are  available  at  NUTS  1  than  for 
NUTS 2 and 3.

d.  In  judging  an  indicator  it  is  useful  to  think  of  the 
‘reversal  test’.  For  instance,  we  can  ask  whether  wages 
and salaries could be estimated from data on GFCF in 
desktop computers, if wages and salaries data are used 
to estimate GFCF. 

e.  Indicators can be tested on real data. To choose between 
different indicators, one can compare the actual figures 
collected with the estimates obtained by using the indi-
cator to break down the national aggregate. The higher 
the correlation, the more suitable the indicator.

f.  Where  there  are  no  appropriate  regional  indicators 
across all EU Member States, for EU purposes the same 
indicator  should  preferably  be  used  across  the  EU  to 
ensure comparable regional data. This is for instance the 
case for the regional allocation of consumption of fixed 
capital (see par. 3.9.1).

3.7.  Adjustment of regional to national 
values; the non-observed economy 

3.7.1. Regional accounts by industry 

The  regional  accounts  are  a  regional  specification  of  the 
corresponding accounts of the total economy. This implies 
that  the  regional  accounts  totals  have  to  add  up  to  the 
national  accounts  totals.  The  national  accounts  total  is 
rarely equal to the total of the source statistics. This is gener-
ally  due  to  corrections  for  adapting  data  which  are  based 
on bookkeeping concepts, national accounts concepts, data 
validation, exhaustiveness (the non-observed economy) and 
balancing supply and use. 

The sum of the regional values in the regional accounts is 
therefore rarely exactly equal to the corresponding national 
accounts  total  and  the  regional  figures  must  usually  be 
adjusted. These differences may arise from random or other 
errors in the regional data itself, or from specific differences 
in the coverage of the units or concepts used in the national 
and regional accounts. 

—  Regarding  sample  design,  is  the  region  for  instance  a 

stratum in the sample?

—  How is non-response treated? Is there an imputation at 

unit level or at national level?

—  Is there item non-response and how is this treated in the 

source statistics and the national accounts?

—  Are all units covered in the source statistics? If not, what 
estimates have been made at the national level (exhaus-
tiveness)?

—  Does  the  timing  of  transactions  in  the  statistical  or 
administrative source differ from the national accounts?

—  What  corrections  have  been  made  for  adjusting  the 
concepts  in  the  source  data  to  arrive  at  the  national 
accounts concepts?

—  What corrections have been made to balance supply and 
demand in the Supply and Use table? On what informa-
tion were these corrections based?

—  What continuity corrections have been made for insta-

bility in the source data?

In  the  absence  of  specific  regional  information,  differ-
ences are usually allocated to the regions in proportion to 
the  regional  values,  so  the  same  percentage  adjustment  is 
applied for all regions. For example, if the national total is 5 
per cent higher than the sum of the regional values because 
of estimates for the non-observed economy, all the regional 
values are raised by 5 per cent. This pragmatic approach is 
not always appropriate for dealing with coverage differences 
or non-random errors. 

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Methods of regionalisation 

Other  solutions  should  always  be  considered  using  direct 
measurement  with  regional  specifications.  It  should 
for  instance  be  investigated  whether  the  non-observed 
economy is different in urban or rural areas. In other words, 
compiling regional accounts requires extensive knowledge 
of the regional economic phenomena by using all existing 
appropriate  data  sources.  This  includes  not  only  official 
statistics,  but  also  government  administrations,  newspa-
pers, trade journals etc.

A  stopgap  solution  would  be  to  make  greater  adjustments 
to  the  less  reliable  estimates  (often  smaller  regions).  This 
is rarely ever done because adjustments will have a signifi-
cant effect on estimates for smaller regions and move them 
further from their original estimates. The opposite approach 
is to include adjustments in large regions where they have 
little effect, and this approach is generally recommended.

3.7.2. The non-observed economy

The  non-observed  economy  is  a  phenomenon  for  which 
estimates  should  be  made  where  possible  in  both  the 
national  and  regional  accounts.  This  manual  focuses  on 
the  estimates  for  the  regional  accounts  by  industry  and 
the  regional  accounts  of  households.  The  non-observed 
economy includes both legal and illegal transactions. In the 
national  accounts,  for  some  industries  such  as  agriculture 
or construction, it may be possible by using various kinds of 
surveys and the commodity flow method to make satisfac-
tory  estimates  of  the  total  output  of  the  industry  without 
being able to identify or measure that part of it that is not 
observed. 

Because  the  non-observed  economy  may  account  for  a 
significant  part  of  the  total  economy  of  some  countries, 
it  is  particularly  important  to  try  to  make  estimates  of  its 
contribution  to  total  production,  even  if  it  cannot  always 
be separately identified (see ESA 2010, par. 11.26 and SNA 
2008,  par.  6.41).  Because  of  this,  it  is  generally  difficult  to 
find  suitable  regional  sources  for  allocating  these  transac-
tions  to  regions.  This  is  especially  true  for  illegal  transac-
tions. Therefore regional indicators have to be used that are 
considered to be close to the phenomenon to be described.

3.7.3. Regional accounts of households 

There  may  be  various  reasons  for  the  differences  between 
the valuations in the source data obtained using the bottom-
up method and those in the sector accounts of households. 
These reasons include, amongst others, the following:

1.  Population differences:

2.  Differences in transaction concepts:

Transaction concepts used in the statistical source may 
differ from the concepts used in the national accounts. 
For  example,  the  income  components  as  measured  in 
the statistical source can differ from the corresponding 
income components in the national accounts as to defi-
nition, recording, observation and valuation:

a.  Transactions  in  national  accounts  may  be  missing 

from the statistical source.

b.  Transactions  in  national  accounts  may  be  only 

partially observed in the statistical source.

c.  Transactions  in  the  statistical  source  may  be  classi-

fied differently in the national accounts.

d.  Transactions in the statistical source may differ from 

the national accounts at the time of recording.

e.  Transactions  in  the  statistical  source  may  have  a 
different valuation to those in the national accounts.

3.  Statistical discrepancies:

After  correction  for  the  differences  mentioned  above, 
there remains a discrepancy between the adjusted data 
from  the  statistical  source  and  the  national  accounts 
data. It includes, amongst other things:

a.  Sampling errors in the statistical source. The source 
used for the regional accounts is the same as for the 
national accounts, but is not entirely representative at 
the regional level.

b.  In  specific  cases,  data  from  regional  accounts  could 
be more accurate than those from national accounts.

c.  The non-observed economy. Data in tax registrations 
could underestimate income because of tax evasion. 
In  national  accounts  corrections  are  made  for  this 
phenomenon. The question is whether tax evasion has 
a regional dimension.

d.  The  sources  used  for  regional  accounts  have  been 

processed in much less detail.

The simplest way of adjusting the valuation of the regional 
accounts  of  households  to  the  corresponding  data  in  the 
national  accounts  is  to  apply  a  single  coefficient  to  the 
values obtained for each region. This will be the ratio of the 
national  accounts  value  to  the  total  of  the  regional  values 
in the regional accounts. The difference is thus divided up 
in  proportion  to  the  regional  valuations  obtained  by  the 
bottom-up method.

These  relate  to  the  additions  necessary  to  achieve 
consistency  between  the  population  of  the  source  and 
that  of  the  national  accounts  household  sector.  They 
relate to people or households that are not observed in 
the  source  data  and  concern  for  example  people  who 
died or emigrated during the survey.

The  constraint  whereby  the  regional  accounts  have  to  be 
consistent  with  the  valuations  of  the  national  accounts’ 
household  sector  accounts  turns  the  bottom-up  method 
into a mixed method for the resulting data in the regional 
accounts. The data on the basic units can be used to deter-
mine levels for each region, acting as a base for the regional 

40

Manual on regional accounts methods  

Methods of regionalisation  3

distribution  of  the  national  flow.  However,  the  bottom-up 
method  is  an  essential  back-up  to  obtain  valid  regional 
results.

It  may  be  useful  to  compare  the  valuations  included  in 
the  regional  accounts  of  households  with  those  of  other 
regional accounts as they relate to a given transaction and 
a  given  region.  For  example,  the  compensation  received 
by  employees  in  households  resident  in  a  region  may  be 
compared  with  the  compensation  paid  by  the  production 
units  resident  in  the  same  region.  The  difference  between 
the two figures is in principle the compensation received by 
residents  but  paid  by  production  units  outside  the  region; 
minus the compensation paid to non-residents by resident 
production units (regarding income for commuters). 

If  the  transaction  is  obtained  by  the  bottom-up  approach, 
the  method  of  adjustment  to  the  national  accounts  flow 
(single  coefficient)  will  first  have  to  be  re-examined,  and 
only  then  will  the  regional  values  prior  to  adjustment  be 
considered  for  revision.  If  the  transaction  is  obtained  by 
the  top-down  method,  the  reliability  of  the  indicator  will 
have  to  be  investigated.  For  example,  the  figures  may  be 
compared  with  those  obtained  using  a  less  closely  related 
indicator  for  the  transaction  in  question,  but  more  repre-
sentative at regional level. 

It  may  also  be  useful  to  compare  the  resulting  balancing 
items,  in  particular  disposable  income  and  saving,  with 
direct information on the corresponding balancing items.

3.8. Final and early regional estimates; 
revisions 

The final estimates for regional accounts variables follow in 
principle the periodicity of the final estimates in the national 
accounts. These final regional accounts are generally based 
on  statistical  sources  that  provide  the  detailed  informa-
tion  needed  for  the  compilation  of  the  national  accounts. 
In  many  cases  regional  accounts  use  the  same  sources  as 
the national accounts. Data at the requested level of detail 
need  time  for  collection  and  processing.  For  example,  the 
detailed SBS (12) survey ultimately provides final data after 
18 months. Preliminary data have to be delivered within 10 
months. Use of administrative data also faces delays in the 
availability of finalised data. This phenomenon is reflected 
in both national and regional accounts. Consequently, one 
can make a distinction between final estimates and early or 
preliminary estimates. As the word ‘final’ suggests, the final 
estimates do not change any more, unless in the case of a 
major revision. The early estimates are generally based on 
indicators of economic growth and assumptions about the 
stability of relationships between datasets. 

(12) Regulation (EC) No 295/2008 of the European Parliament and of the Council of 11 March 

2008 concerning structural business statistics (recast), article 8, section 2.

For instance, national accounts of year (t-2) might provide 
final estimates and the estimates for the years (t-1) and (t) 
are provisional and generally based on short-term indicators 
and assumptions. Because of this the provisional estimates 
are  less  accurate  than  the  final  estimates.  When  new  data 
become available, the years (t-1) and (t) have to be revised. 
These revisions should be as small as possible. 

When provisional estimates are made for regional accounts, 
it  is  clear  that  these  provisional  accounts  cannot  be  based 
on the previously mentioned detailed sources. Just like the 
national  accounts,  the  provisional  regional  accounts  are 
based on extrapolation with the aid of short-term indicators 
and assumptions. This leads to the following methods:

1.  The  simplest  method  consists  of  extrapolating  the 
regional  data  on  the  basis  of  the  development  of  the 
corresponding national totals, using the regional distri-
bution  of  the  transactions  in  the  most  recent  defini-
tive  year.  This  method  of  regionalisation  is  basically  a 
rough  top-down  method.  Checks  have  to  be  made  to 
see whether such a relatively rough and simple method 
produces a good forecast of the final regional accounts. 
In  using  this  method,  one  has  to  remember  that  revi-
sions in principle have two causes: 

a.  Revisions  in  the  national  accounts  have  to  be 
reflected  in  the  regional  accounts.  There  might  for 
example be large revisions for the chemical industry 
at the national level. Provisional data for GVA of this 
industry are mainly based on extrapolating output by 
an  indicator  such  as  change  in  turnover,  and  inter-
mediate consumption is estimated on the assumption 
that the share of intermediate consumption in output 
remains the same. However, if this share changes this 
might lead to big revisions, because of the large share 
of intermediate consumption.

b.  Secondly  the  regional  distribution  might  change 
because some regions demonstrate different patterns 
of growth when using the finalised data. 

2.  A mixed method could be used. The amounts for each 
region as they figure in the latest final regional accounts 
are  extrapolated  using  appropriate  indicators,  and  the 
projection thus obtained is then used to apportion the 
national total. 

3.  These two methods do not, of course, rule out the possi-
bility  of  estimating  some  transactions  in  a  provisional 
account on the basis of direct information or statistical 
indicators relating to the year under consideration.

Whether  extrapolation  methods  could  be  refined  depends 
on the timeliness of relevant regional short-term indicators. 

Because of the assumptions one has to use when compiling 
provisional regional  GVA estimates, it is recommended to 
compile these estimates at the same level of industrial detail 
as  the  final  regional  estimates,  which  should  be  at  least  at 

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Methods of regionalisation 

the industrial detail of A*38 or preferably in greater detail 
of NACE Rev 2. Moreover it is recommended not to publish 
the data at the same level of detail of the final accounts but 
at a more aggregated level. 

Revisions  to  the  regional  accounts  have  to  be  analysed 
carefully  on  an  annual  basis. This  analysis  could  result  in 
recommendations for the compilation of national accounts, 
but also in recommendations for the compilation of regional 
accounts estimates.

3.9. Accuracy of regional accounts 
estimates (A, B and C-methods) 

3.9.1. Introduction

This  manual  describes  possible  methods  that  can  be  used 
for  the  estimation  of  regional  accounts  indicators  such  as 
GVA in current and previous year’s prices, GFCF, employ-
ment,  primary  and  disposable  income  of  households,  and 
final consumption expenditure of households.

The  methods  are  classified  according  to  their  suitability. 
They can be divided into three groups (13), as follows:

1.  A-methods represent the actual values or approximate 

the ideal as closely as possible. 

2.  B-methods are acceptable alternatives: they are further 
away  from  the  ideal  but  still  provide  an  acceptable 
approximation. 

3.  C-methods are too far away from the ideal to be consid-
ered as acceptable and should be improved if possible. 

This classification will be used throughout this manual.

The  A,  B  and  C-classification  aims  to  improve  current 
practice. The main goal is achieving greater comparability 
between  the  regional  data  of  the  EU  countries.  The  clas-
sification  is  also  a  tool  for  self-assessment.  It  sets  out  in 
what direction improvements can be made. In this way, it 
becomes clear where the biggest problems exist in terms of 
missing data and how far current practice is away from best 
practice. Nevertheless, it may well be that in specific cases 
the ideal methods are impractical in the short or medium 
term because of a lack of suitable source data. 

That  might  for  instance  be  the  case  for  the  estimation  of 
the  GVA  of  local  KAUs  of  a  multiregional  enterprise  or 
general  government.  It  might  be  that  the  capital  intensity 
of  the  production  processes  of  the  local  KAUs  varies  for 
each  local  KAU,  for  instance  between  ancillary  units  and 
production  units.  In  the  case  of  multiregional  enterprises 
the main components of GVA of a local KAU, i.e. compen-
sation  of  employees,  consumption  of  fixed  capital  and  net 
operating surplus should, according to the income method, 

(13) See also the Handbook on price and volume measures in national accounts, Eurostat  2001.

be  taken  into  account.  This  implies  that,  for  a  local  KAU, 
besides  compensation  of  employees  there  should  also  be 
information available about the stock of fixed assets and the 
expected  average  economic  life  of  the  different  categories 
of those goods that enable the application of the Perpetual 
Inventory  Method  (PIM)  for  measuring  consumption  of 
fixed capital (see ESA 2010, par. 3.141). However this infor-
mation  will  not  be  available  in  the  short  or  medium-term 
(see par. 3.2.1). Also the regional allocation of net operating 
surplus  to  the  local  KAU  is  highly  arbitrary.  This  implies 
that  the  allocation  of  net  operating  surplus  can  only  be 
based on a convention. 

This example demonstrates that at present the ideal method 
cannot  be  applied  because  of  a  structural  lack  of  regional 
data for consumption of fixed capital. Therefore compara-
bility between the methods that are applied by EU countries 
for the estimation of regional GVA of local KAUs of a multi-
regional enterprise is the highest achievable goal. Based on 
these observations it is, for the time being, acceptable that 
GVA estimates for local KAUs of a multiregional unit that 
account  for  the  regional  distribution  of  compensation  of 
employees, but not that of consumption of fixed capital and 
net operating surplus, can still be considered a B-method. 
However,  in  some  cases  gross  operating  surplus  might  be 
regionalised on the basis of indicators that are considered to 
reflect capital intensity. Some examples will be discussed in 
more detail in chapters 4 and 5. 

The classification of methods can differ at different NUTS 
levels; it can differ for uniregional and multiregional enter-
prises,  for  small  and  large  enterprises,  from  indicator  to 
indicator,  from  industry  to  industry  and  from  economic 
accounts  by  industry  to  household  accounts.  What  is 
considered a good method for one indicator can be less suit-
able or even unacceptable for another. For example, the use 
of labour figures for the estimation of GVA might be clas-
sified  as  a  B-  or  C-method  while  being  an  A-method  for 
employment. 

Institutional  differences  between  countries  may  lead  to 
different data sources being available and therefore different 
applicable  methods.  The  results  of  the  different  methods 
can nevertheless be comparable. The A, B and C-classifica-
tion  shows  which  methods  are  considered  to  give  accept-
able  results  and  which  methods  give  unacceptable  results. 
It  provides  the  framework  for  a  harmonised  approach  to 
improving the reliability and comparability of transactions 
and balancing items in the regional accounts.

The  most  appropriate  method  for  estimating  the  regional 
variables  will  depend  largely  on  the  particular  circum-
stances, however a few general criteria can be specified for 
regional accounts data. See also par. 4.3 about the choice of 
indicators for the regional accounts by industry.

Before going into detail, eight observations have to be made:

42

Manual on regional accounts methods  

Methods of regionalisation  3

I. 

II. 

Regional accounts staff should be aware  of the  relia-
bility of the source statistics for regional purposes and 
the methods used to compile the source statistics and 
the national accounts (see par. 3.7).

Surveys  are  generally  based  on  samples  and  are 
designed  for  national  purposes.  Samples  might  be 
partly census based, for instance for bigger enterprises, 
and partly based on a fraction of the total population 
of smaller enterprises. It is necessary to verify whether 
the  sample  for  small  enterprises  is  representative  for 
the regions at levels NUTS 1, 2 and 3. If the latter is not 
the case for a regional level, for instance NUTS 3 level, 
one should use a small area estimation method (14). 

III.  The  regional  accounts  estimates  can  never  have  a 
higher  classification  than  the  classification  of  the 
source  statistics  used  for  the  regional  accounts  esti-
mates  (see  par.  3.7).  That  might  for  instance  be  the 
case if employment data of LFS are used, without any 
correctivn,  for  the  regionalisation  of  GVA  at  NUTS 
3 level, for the LFS sample survey is not designed for 
reliable data at NUTS  3 level. 

IV.  For  reasons  of  consistency,  regional  accounts  should 
try  to  use  the  same  data  sources  as  the  national 
accounts. 

V.  Accuracy of the data might be improved by using the 
most  suitable  regional  indicators  (when  available)  at 
for instance NUTS 1 or NUTS 2 level, and less suitable 
indicators at NUTS 3 level. The estimates at NUTS 1 
or NUTS 2 level are then compiled prior to the esti-
mates at NUTS 3 level (see also par. 3.4). The data at 
NUTS 2 level are crucial for the purpose of the alloca-
tion of the Structural Funds.

VI.  The regional accounts by industry in current prices at 
NUTS 2 level should be based on at least NACE Rev. 
2 division, A*38 (see Annex 3a) and for some indus-
tries  even  the  industrial  detail  of  A*64  or  beyond  is 
preferred for the purpose of early estimates and esti-
mates in prices of the previous year.

VII.  The use of the rules of ESA 2010 is essential. 

VIII. The A, B or C-classification cannot be given in precise 
confidence  intervals,  but  merely  focuses  on  the 
methods and statistical indicators used for the compi-
lation of the regional aggregates. 

(14) See for instance: The EURAREA Consortium, Enhancing Small Area Estimation 

Techniques to meet European Needs, EURAREA, August 2004.

3.9.2. Regional accounts by industry 

3.9.2.1. Compilation of GVA, output and intermediate 
consumption or components of GVA in current prices

This paragraph is closely related to paragraph 3.4, in which 
the  theoretical  concepts  are  described  for  a  correct  use  of 
indicators for estimating regional GVA by industry.

1.  Bottom-up methods for which the sum of the regional 
totals generally does not add up to the national accounts 
total  can  be  considered  as  A-methods  if  the  following 
conditions are satisfied: 

a.  Issues  causing  a  difference  between  the  national 
accounts  total  and  the  corresponding  regional  total 
have  to  be  investigated,  especially  where  the  issues 
have  a  regional  dimension.  The  national  accounts 
process tables are of help to approach this in a system-
atic  way.  The  causes  might  be,  for  example:  adjust-
ments in the national accounts for the non-observed 
economy, data validation, concepts, and the balancing 
of  the  Supply  and  Use  tables.  The  main  question  is 
whether  the  differences  have  a  regional  dimension. 
When the adjustments are based on statistical units 
they do, by definition, have a regional dimension and 
the  regional  accounts  estimates  should  account  for 
this. The same can be true for estimates of the non-
observed economy. 

b.  If the presence of a regional dimension to the differ-
ence  has  not  been  investigated,  the  method  would 
become a B-method.

c.  Differences  caused  by  balancing  do  not  generally 
have a specific regional origin. Because of this, such 
differences can be allocated to regions pro rata. This 
would be an A-method. 

2.  Pseudo-bottom-up: using these methods, data for local 
KAUs have to be estimated for multiregional enterprises, 
using either the output or the income approach. 

a.  Output  and  intermediate  consumption  for  multire-
gional  enterprises  are  available  for  the  local  KAUs. 
This would be an A-method. This method may also 
be classified as a bottom-up method. 

b.  For large multiregional enterprises estimates of GVA 

for local KAUs have been made for which:

—  For the income approach: this method is consid-
ered  an  A-method  if  the  labour  input  and  the 
capital intensity of the local KAUs has been sepa-
rately  taken  into  account  or  when  there  are  no 
big  differences  in  capital  intensity  for  the  local 
KAUs.  The  latter  might  be  the  case  for  a  chain 
of  shops  in  the  retail  trade.  However,  be  aware 
of  distribution  centres  for  such  industries  that 
generally  have  much  higher  capital  intensity.  If 

  Manual on regional accounts methods

43

3

Methods of regionalisation 

the  capital  intensity  of  the  local  KAUs  has  not 
been  separately  taken  into  account,  the  method 
would become a B-method when the distribution 
centres do have high capital intensity. The result 
is based on a mixed method (see also par. 3.9.1). 

—  For the output approach: this method is consid-
ered an A-method if the regional indicators used 
are  closely  related  to  the  regional  distribution 
of  output  and  intermediate  consumption.  For 
instance if the output of local KAUs is estimated 
by the turnover of the local KAUs, it is assumed 
that there are no changes in stocks (see par. 3.4). 
If  intermediate  consumption  is  estimated  by 
using a fixed proportion of output, it is assumed 
that  the  production  processes  are  exactly  the 
same for each local KAU. The assumptions need 
to  be  verified.  If  the  verification  has  been  done 
and  the  results  show  acceptable  results,  the 
method is considered a B-method. The method is 
a C-method if the verification has not been done. 

3.  Top-down  output  methods 

for 

industries  where 
comprehensive  regional  data  on  produced  goods  and 
their prices and intermediate consumption are available 
can be classified as A-methods. This is for example the 
case for agriculture where data can be based on the agri-
cultural  census  and  collected  producer  prices.  If  esti-
mates  for  intermediate  consumption  are  model-based, 
then the GVA estimate becomes a B-method. 

4.  Top-down  methods  for  the  regionalisation  of  GVA 
where  the  regional  indicator  is  closely  related  to  GVA 
would be an A-method. For instance, this might be the 
case  with  the  regional  distribution  of  GVA  of  central 
government  and  the  compensation  of  central  govern-
ment  employees.  The  additional  condition  is  that 
consumption  of  fixed  capital  is  also  closely  related  to 
compensation  of  employees.  However,  the  regionalisa-
tion of GVA by compensation of employees would be a 
B-method if consumption of fixed capital is not closely 
related to compensation of employees. 

5. 

 Methods  that  do  not  fulfil  the  criteria  of  the  A  or 
B-methods  are  C-methods.  That  is  generally  the  case 
for top-down methods where no appropriate indicators 
have been used. Such methods need to be avoided as far 
as possible.

3.9.2.2. Compilation of GVA, output and intermediate 
consumption or components of GVA in prices of the 
previous year

compile GVA in prices of the previous year. One of the prin-
ciples is that the compilation should be based at least at P*64 
of CPA 2008. However, the compilation of regional GVA in 
current  prices  is  not  directly  product  based,  but  based  on 
aggregated  transactions  such  as  output  and  intermediate 
consumption. 

The compilation of regional GVA in current prices is recom-
mended  to  be  based  at  least  at  A*38  of  NACE  Rev.  2  (see 
par.  3.9.1).  However,  this  level  of  aggregation  is  probably 
inadequate for the compilation of regional GVA in prices of 
the previous year. Therefore it is recommended to compile 
regional GVA in prices of the previous year in greater detail 
than A*38. This will be discussed further in chapter 6. This 
chapter also discusses in detail which methods are consid-
ered A, B, or C-methods.

3.9.3. Regional labour data by industry 

1.  Bottom-up methods, based on the residence of the local 
KAU  or  the  region  for  compensation  of  employees, 
total  employment  and  total  of  employees  in  numbers 
of  persons  and  hours  worked  can  be  considered  as 
A-methods. This implies that if the sum of the regional 
totals  does  not  add  up  fully  to  the  national  accounts 
total, the difference has been investigated to establish if 
it has a regional component. If a substantial difference 
has  not  been  investigated  and  is  proportionally  allo-
cated to regions top-down, the method would become a 
B-method. If there is a regional component, corrections 
should  be  made.  If  these  corrections  are  not  made  the 
method becomes a C-method. 

2.  Bottom-up  methods,  based  on  the  residence  of  self-
employed  and  employees  would  be  an  A-method, 
if  corrections  have  been  made  for  commuting,  the 
employer’s part in compensation of employees and if the 
industry of the employed persons can be determined in 
an accurate way. This is rarely the case. 

3.  Top-down methods, based on the residence of the local 
KAU and indicators which are closely related could be 
an  A-method.  For  example,  the  regional  distribution 
of the number of employees may be used to allocate the 
national accounts total of wages and salaries to regions, 
if  the  composition  of  employees  regarding  wage  level, 
education levels, part-time work etc. is (almost) exactly 
the  same  in  each  region.  If  indicators  are  less  closely 
related  or  the  wage  level  etc.  varies  between  regions 
and no corrections have been made, the method would 
become a B- or even a C-method where the composition 
of employees differs highly for the different regions. 

The  Handbook  on  price  and  volume  measures  in  national 
accounts  (15)  gives  guidelines  for  appropriate  methods  to 

3.9.4. Regional data on GFCF

(15) Handbook on price and volume measures in national accounts, Eurostat and European 

Commission, 2001 edition.

To become an A-method regional data on GFCF have to be 
based on surveys, administrative data, or technical, profes-
sional and trade journals which at least contain the required 

44

Manual on regional accounts methods  

Methods of regionalisation  3

3.9.5.1. Primary and disposable income of households

1.  Bottom-up  methods  applied  to  income  transactions 
that constitute the balancing items primary and dispos-
able  income  would  be  A-methods,  if  the  sum  of  the 
regional  totals  is  close  to  the  corresponding  national 
accounts  total  and  the  difference  between  the  regional 
and the national accounts totals is proportionally allo-
cated  to  regions  by  income  transaction.  The  resulting 
data are thus based on a mixed method. There are sepa-
rate  regional  estimates  for  the  non-observed  economy 
(see  also  par.  3.7.2  and  10.4)  using  for  instance  the 
regional distribution of mixed income as an indicator.

2.  Top-down methods applied to income transactions that 
constitute  the  balancing  items  primary  and  disposable 
income  can  be  considered  A-methods,  if  appropriate 
regional  indicators  are  used  to  allocate  the  national 
accounts  total  to  regions.  There  are  separate  regional 
estimates  for  the  non-observed  economy  using  for 
instance  the  regional  distribution  of  mixed  income  as 
an indicator.

3.  If  no  separate  estimates  have  been  made  for  the  non-
observed  economy,  the  method  would  become  a 
B-method  or,  if  none  of  the  aforementioned  methods 
are used, a C-method. 

3.9.5.2. Final consumption expenditure of households 

1.  Bottom-up  methods  cannot  be  applied  because  suffi-
cient  reliable  data  sources  on  final  consumption  are 
lacking. Thus top-down methods are the norm for the 
regionalisation  of  final  consumption  expenditure  of 
households.  When  appropriate  regional  indicators  can 
be used for the regionalisation of final consumption, this 
will be classified as a B-method.

2. 

 Top-down  methods  using  inappropriate  regional  indi-
cators,  such  as  using  the  regional  distribution  of  the 
resident population to estimate the consumption of elec-
tricity, are classified as C-methods that are unacceptable 
and should be improved. See par. 10.4 for more details.

regional breakdown, GFCF classification, ownership, valua-
tion and time of recording. It is in fact very difficult to find 
indicators that are closely related (see par. 1.2.4), especially 
for investment in all kinds of machinery, buildings and civil 
engineering works.  

Some  investment  in  assets,  such  as  personal  computers, 
is  related  to  employed  persons.  If  one  can  assume  a  close 
relationship  between  the  indicator  employed  persons  and 
investment  in  ‘personal’  assets,  such  a  method  becomes  a 
B-method.

This implies that methods which are not based on the above 
conditions  become  C-methods.  See  chapters  7  and  8  for 
more details.

3.9.5. Regional sector accounts of households 

Regional  accounts  of  households  are  generally  based  on  a 
variety  of  sources.  The  regional  distribution  of  household 
income is mainly based on fiscal registrations. It is acknowl-
edged  that  fiscal  registrations  underestimate  household 
income because of tax evasion. There are several techniques 
to  provide  estimates  for  this  phenomenon  in  national 
accounts,  without  attempting  to  get  regional  data  on  the 
non-observed economy (see also par. 3.7.2). In most of the 
cases regionalisation of the national estimates for the non-
observed economy will be done on the regional distribution 
of households or other variables. 

The  regional  distribution  of  household  primary  income 
might also be based on compensation of employees, oper-
ating surplus (from owner-occupied dwellings) and mixed 
income of self-employed people from the regional accounts 
by industry. This is conditional on corrections being made 
for  commuting  and  cross-border  workers.  Besides  that, 
separate  estimates  for  self-employed  people  and  the  non-
observed  economy  should  be  available  at  the  required 
regional level. 

The regional distribution of final consumption expenditure 
of  households  is  generally  based  on  different  statistics  or 
registrations. Household budget surveys are of limited use 
as they are generally designed for national purposes and do 
not  usually  cover  institutional  households,  such  as  homes 
for  the  elderly  etc. The  non-observed  economy  might  also 
be  important.  Non-response  in  the  household  expendi-
ture  surveys  may  lead  to  biased  results.  This  implies  for 
example that data for the retail trade might serve as a basis 
for the estimates of food consumption by households. In the 
national accounts domestic consumption data are corrected 
for the consumption of non-residents in the country and the 
consumption  by  residents  in  other  countries.  In  regional 
accounts it is almost impossible to correct for these flows. 

The main conclusion is that it seems practically impossible 
to  apply  A-methods  for  the  compilation  of  regional  final 
consumption expenditure of households.

  Manual on regional accounts methods

45

General principles and methods  
for the compilation of regional GVA 
by industry and regional GDP

4

4.  General principles 

and methods for the 

compilation of regional 

GVA by industry and 

regional GDP

4

General principles and methods  for the compilation of regional GVA by industry and regional GDP

4.1. Introduction

Regional GVA is a measure of the economic activity of local 
KAUs resident in a region. It does not measure the income 
of resident households. 

As a general principle GVA should be allocated to the region 
where the production unit carrying out the activity is resi-
dent. The activities may be categorised as production activi-
ties and ancillary activities. 

The  local  KAUs  for  production  activities  may  be  farms, 
mines,  oil  platforms,  factories,  building  sites,  shops, 
airports,  railway  stations,  harbour  installations,  offices  of 
lawyers, government buildings, hospitals etc. 

Separate  local  KAUs  for  ancillary  activities,  which  are 
located  in  different  regions  to  their  associated  production 
units, may be administrative centres (head offices of multi-
regional  enterprises),  distribution  centres  for  retail  and 
wholesale  trade  and  post,  maintenance  centres  for  mobile 
equipment etc. Mobile equipment is explicitly excluded as a 
production unit and its activity has to be attached to a local 
unit. 

The residence of the local unit is an essential criterion for 
the  allocation  of  the  GVA  generated  in  local  units  to  a 
particular region (see par. 2.3).

The quality of the estimated GVA per region clearly depends 
on the availability and quality of the statistical sources. For 
national and regional statisticians, the ideal world would be 
one  where  comprehensive  and  perfect  data  were  available 
that perfectly suit the economic concepts of the system of 
national and regional accounts. In reality the available data 
are far from comprehensive or perfect (see par. 3.9.2). 

A key requirement of the compilation of national accounts is 
that the results of the process have to fit into a set of macro-
economic identities in which supply equals demand. When 
this condition is not fulfilled, the national statisticians have 
to balance the data through an iterative adjustment process. 
In  this  process  the  statisticians  have  to  consider  possible 
divergences from the definitions, the universe from which 
the data are drawn, sampling errors etc. The outcome of the 
balancing process is a complete set of consistent data. 

integration, to the final results. This transparency contrib-
utes to a better standardisation of the process with repro-
ducible results. 

The choice of sources and methods used to compile regional 
GVA also has to be clarified. As we have seen, two methods 
can  be  used:  the  production  approach  and  the  income 
approach.  Should  it  be  one  method  or  a  combination  of 
methods? Each method requires the availability of suitable 
sources, but why is one source better suited than another? 
This question requires a profound knowledge of the possible 
sources in terms of the sample frame, sample size, response 
rate,  imputation  method  for  non-response,  sampling  and 
non-sampling  errors,  grossing-up  methods,  stability  of 
the  results  in  time,  definitions  used,  divergence  from  the 
national accounts definitions, sources for adapting data to 
the national accounts definitions, timely availability of the 
data etc. Is the level of regional GVA the main purpose or 
is the focus on changes in regional GVA in current prices 
or in prices of the previous year? This may require the use 
of  different  sources,  so  the  statisticians  must  judge  the 
suitability  of  sources  for  national  and  regional  accounts 
purposes. 

Generally  speaking,  there  are  more  potential  sources  for 
the compilation of national accounts than for the regional 
accounts.  The  regional  accounts  generally  have  to  rely  on 
limited information. The main limitations are the following: 

1.  Although  the  local  KAU  (establishment  in  SNA)  is 
recommended  by  ESA2010  and  SNA2008,  most  coun-
tries only have available data at the enterprise level for 
the  description  of  the  production  process.  Therefore 
data  for  multiregional  enterprises  have  to  be  allocated 
to  regions  according  to  economic  indicators  such  as 
persons in employment, number of employees, compen-
sation  of  employees  or  other  data  that  have  some  rela-
tionship with the value added of these local KAUs. 

2.  In most countries, the statistical results in the regional 
accounts  are  based  on  a  mixed  method  using  compre-
hensive  information  for  large  enterprises  and  samples 
or administrative data for small enterprises. Economic 
indicators have to be used to compile the results for the 
sampled part or administrative data may be used. 

Because  of  this  balancing  process  and  because  of  non-
sampling  errors,  it  is  impossible  to  describe  the  statistical 
results in terms of standard errors. Therefore the accuracy 
of the national accounts results cannot be quantified using 
statistical confidence intervals. This fact, and public interest 
in the national and regional accounts data, make it neces-
sary to clarify the compilation process in terms of sources 
and  methods  used.  The  Gross  National  Income  (GNI) 
inventories  and  process  tables  provide  a  profound  clarifi-
cation of the compilation of the national accounts. Process 
tables are meant to provide transparency in the description 
of the statistical process from source data, adaptations and 

3.  Generally,  comprehensive  data  are  available  for  final-
ised  years,  which  is  not  the  case  for  provisional  years. 
For  provisional  years,  both  the  national  and  regional 
accounts estimates of GVA are generally based on indi-
cators. 

4.  In some countries, surveys face growing (unit and item) 
non-response,  so  that  indicators  or  data  from  alterna-
tive sources have to be used to impute data for the non-
responding units. 

5. 

 Some countries use registrations. This might give prob-
lems with timeliness, the fit with the national accounts 

48

Manual on regional accounts methods  

General principles and methods  for the compilation of regional GVA by industry and regional GDP 4

definitions, information not reported to the administra-
tion (the non-observed economy) and changes in legis-
lation  that  affect  the  comparability  of  the  data.  Again 
indicators have to be used for an accurate description of 
the (regional) economy.

By  the  end  of  this  paragraph  we  have  to  stress  that  this 
manual  is  limited  to  the  concept  of  accuracy  as  used  in 
the Eurostat quality reports (see par. 1.7). In these quality 
reports accuracy is one of the principal aspects of quality. 
Other aspects, such as timeliness and punctuality, accessi-
bility  and  clarity,  comparability,  coherence  and  complete-
ness also play an important role in the quality reports, but 
these aspects have been left aside in the process tables.

4.2. Applying the production and/or 
income approach 

GVA  by  industry  can  be  estimated  in  two  ways  (see  par. 
3.2.1):  the  output  and  the  income  approaches.  The  two 
methods lead to the same GVA and both methods are gener-
ally  applied  at  the  national  level.  The  output  and  income 
measures of GVA by industry at national level can be used 
together in Supply and Use tables to validate each other. 

Both approaches can also be used for regional accounts by 
industry.  Ideally  two  estimates  would  be  calculated  inde-
pendently and the results used together. In practice Member 
States only have regional data for one set of estimates. Most 
Member  States  use  an  output  method  supplemented  with 
the  income  method  for  general  government,  the  health 
industry and some service industries for which little output 
data are available.

The  income  and  production  approaches  can  be  used  in 
combination  with  the  various  bottom-up  and  top-down 
methods  discussed  in  par.  3.3.  There  is  no  obligation  for 
Member  States  to  adopt  the  same  approach.  The  choice 
depends  mainly  on  the  statistical  sources  available  and 
methods should be designed to make the best possible use 
of whatever detailed regional data exist.

1.  For  the  production  approach  output  (basic  prices)  and 
intermediate  consumption  (purchasers’  prices)  should 
be available. 

2.  For the income approach, the following components and 
sub-components  should  be  estimated  separately  wher-
ever possible:

a.   Compensation of employees:

—  Wages and salaries.

—  Employers’ social contributions.

b.   Gross operating surplus (GOS):

 — Net operating surplus of corporations.

 — Net mixed income of unincorporated enterprises.

—  Net  operating  surplus  from  owner-occupied 

dwellings.

—  Consumption of fixed capital.

c.   Other taxes less subsidies on production.

4.3. The choice of indicators in the case 
of multiregional KAUs, ancillary units and 
units without permanent labour 

4.3.1. Value added of ancillary units of a 
multiregional enterprise

No  delivery  of  ancillary  output  between  local  KAUs  is 
recorded,  unless  it  is  observable  (see  ESA  2010,  par.  1.31 
and 13.22). This implies that the outputs of ancillary units 
are only recorded as far as this is practised in the national 
accounts. If output of an ancillary unit is recorded, the main 
rule in national accounts is that ‘output of the ancillary unit 
may  be  estimated  by  summing  costs’  (ESA  2010,  par.  1.31 
and 13.23). It may be unlikely that the ancillary unit, as local 
unit, will be distinguished. This doubt is based on the regu-
lation  regarding  the  business  register  (No  177/2008).  This 
regulation states in the Annex that the stratification char-
acteristic ‘Activity carried out in the local unit constituting 
an ancillary activity of the enterprise to which it belongs’ is 
optional. Therefore this information may not be available in 
a systematic and organised way.

The rule of summing costs (ESA 2010, par. 1.31 and 13.23) 
implies  that  information  should  be  made  available  about 
compensation  of  employees,  consumption  of  fixed  capital 
and other taxes less subsidies on production. 

We can now distinguish the following situations:

1.  An ancillary unit is a local unit which resides in a region 
different  from  the  regions  where  the  production  units 
reside. Information about the ancillary unit is available 
in the national accounts. This implies that information 
is  also  available  for  the  regional  accounts.  In  this  case 
we  can  apply  the  bottom-up  method  with  exactly  the 
same valuation of output and intermediate consumption 
as  in  the  national  accounts.  This  can  be  labelled  as  an 
A-method.

2.  An ancillary unit is a local unit which resides in a region 
different  from  the  regions  where  the  production  units 
reside. Information about the ancillary unit is however 
not available in the national accounts. This case is more 
complicated,  for  in  the  national  accounts  no  separate 
estimate has been made for the output of the ancillary 
unit. In this case we have to solve the contradiction that, 
according  to  ESA  2010,  par.  3.13,  we  have  to  allocate 
ancillary  activities  to  the  ‘region  where  the  ancillary 
activities are situated’ and at the same time we have to 
fulfil the condition that the regional accounts variables 

  Manual on regional accounts methods

49

4

General principles and methods  for the compilation of regional GVA by industry and regional GDP

have to add up to the corresponding national totals (see 
ESA 2010, par. 13.02). 

I.  The scenario in which the national accounts estimate 
is based on all local units, excluding the ancillary unit, 
with available information about output, intermediate 
consumption, compensation of employees, consump-
tion  of  fixed  capital  (CFC)  and  the  balancing  items 
GVA  and  net  operating  surplus  (NOS),  is  shown  in 
Table  1.  For  the  ancillary  unit,  information  is  only 
available  about  compensation  of  employees,  hours 
worked  and  an  estimate  for  CFC,  which  plays  a  role 
because  of  its  importance  as  part  of  GVA.  Interme-
diate  consumption  by  the  ancillary  unit  is  already 
allocated  to  the  production  units.  According  to  ESA 
2010,  par.  13.23  NOS  is  by  definition  zero. The  costs 
of  the  ancillary  unit  serve  the  production  processes 
of the production units in the other regions, by which 
intermediate  consumption  of  the  production  units 
will be increased. Hours worked of employees of the 
production units have been used to allocate the sum 
of  costs  to  the  regions  of  the  production  units.  It 
might be assumed that the ancillary activities mainly 
involve activities, such as accounting, data processing, 
maintenance, purchasing, distribution etc., which are 
strongly  related  to  the  number  of  hours  worked  of 
employees. This is a pseudo-bottom-up method with 
a top-down element for the regional allocation of the 
sum of the costs of the ancillary unit, which would be 
labelled an A-method.

II. 

For  GVA  of  the  ancillary  unit,  the  same  situation 
results  when  the  output  of  the  ancillary  unit  (160) 
is  estimated  as  the  sum  of  the  costs,  in  our  example 
compensation of employees (150) and consumption of 
fixed capital (10). The estimated output of the ancillary 
unit has to be allocated to the production units, using 
the  same  regional  distribution  key  as  in  scenario  I. 
As a consequence, the corrected output and interme-
diate  consumption  of  the  enterprise  differs  from  the 
originally  estimated  data,  while  the  estimate  of  total 
GVA of the enterprise remains unchanged (see Table 
2).  Regional  GOS  will  be  compiled  as  the  difference 
between the corrected regional GVA and the sum of 
compensation of employees and other taxes less subsi-
dies on production per region.

This method for the estimation of regional GVA will be an 
A-method,  as  in  the  first  scenario.  However,  two  remarks 
have to be made.

1.  Firstly,  output  and  intermediate  consumption  do  not 
add  up  to  the  national  accounts  totals,  if  the  national 
accounts  estimates  are  directly  based  on  the  SBS.  This 
may  pose  problems  where  output  and  intermediate 
consumption  are  grossed  up  to  the  corresponding 
national accounts totals. If this is the case, method I is 
preferred.

2.  Secondly,  the  compilation  of  GVA  in  prices  of  the 
previous  year  favours  the  double  deflation  method, 
for  which  correct  data  for  output  and  intermediate 
consumption  are  necessary.  In  this  case,  method  I  is 
again preferred.

The examples I and II are a simplification of reality because 
other taxes less subsidies on production are not taken into 
account. However, including these taxes and subsidies will 
not fundamentally change the method.

Scenarios  I  and  II  will  probably  almost  never  occur  and 
might  be  described  as  the  ideal  situation.  They  might 
however serve as a benchmark for situations in which less 
favourable data are available.

III.  The  main  problem  is  that,  for  the  ancillary  units, 
data are generally only collected for compensation of 
employees  and  employment,  as  is  generally  the  case 
for local KAUs of a multiregional enterprise or KAU 
(number of employees or hours worked). This implies 
for  the  ancillary  unit  a  lack  of  data  for  output  and 
intermediate consumption, and probably also for CFC 
and  NOS.  With  the  absence  of  regional  data  for  the 
previously  mentioned  variables,  a  solution  for  esti-
mating GVA of the ancillary unit might be the adop-
tion of a combination of the income approach and top-
down method. 

So, we need at least the regional distribution of compensa-
tion  of  employees  and  of  national  gross  operating  surplus 
(GOS).  The  regional  distribution  of  compensation  of 
employees is generally available and the regional distribu-
tion of GOS is generally not available. Therefore the focus 
is  on  which  regional  indicators  should  be  applied  to  GOS 
where  no  direct  regional  indicators  are  available.  Table  3 
provides a possible solution. 

GVA  of  the  ancillary  unit  may  be  estimated  by  summing 
compensation of employees of the ancillary unit and CFC 
of the ancillary unit. By definition NOS is zero. It is essen-
tial that an estimate of CFC of the ancillary unit should be 
made. The main reason is that the share of CFC in GVA of 
the ancillary unit generally differs largely from the share of 
CFC of the production units. One should try to avoid over 
or under estimation of GVA for the ancillary unit. The next 
step is to allocate GOS (excluding GOS of the ancillary unit) 
to the production units in the different regions. 

The  regional  distribution  of  compensation  of  employees 
might be a suitable indicator if the share of compensation 
of employees in GVA is similar across different regions. If 
this  is  the  case  and  a  separate  estimate  for  CFC  has  been 
made for the ancillary unit, this method may be classified 
as a B-method. 

Where  no  separate  estimate  can  be  made  for  CFC  of  the 
ancillary unit and an indicator has to be used such as the 
number  of  employees  or  hours  worked  of  employees,  this 

50

Manual on regional accounts methods  

General principles and methods  for the compilation of regional GVA by industry and regional GDP 4

Table 1: Correction of intermediate consumption of production units with the sum of compensation  
of employees and consumption of fixed capital using the output method

Regions

t
u
p
t
u
O

1

e
t
a
i

d
e
m
r
e
t
n
I

n
o
i
t
p
m
u
s
n
o
c

2

s
t
s
o
c
f
o
m
u
S

3

Given 
data

Given 
data

Using 
distribution 
of 9 regarding 
production 
units

Ancillary unit

Production unit

Production unit

Production unit

Production unit

National

1

2

3

4

5

0

400

800

0

190

425

3 000

1 850

700

375

4 900

2 840

-160

16

24

80

40

0

e
t
a
i

d
e
m
r
e
t
n

i

h
t
i
w

d
e
t
c
e
r
r
o
c
y
d
a
e
r
l
a

f
o
n
o
i
t
p
m
u
s
n
o
c

t
i

n
u
y
r
a
l
l
i
c
n
a

h
c
i

h
w

f
o
A
V
G

4

4=1-2

0

210

375

1 150

325

2 060

A
V
G
d
e
t
c
e
r
r
o
C

5

s
e
e
y
o
l
p
m
e

f
o
.
p
m
o
C

6

C
F
C

7

S
O
N

8

f
o
d
e
k
r
o
w
s
r
u
o
H

s
e
e
y
o
l
p
m
e

9

S
O
G

10

5=6+7+8 
and 
5=4-3 
Balancing item

Given 
data

Given 
data

8=5-6-7 
Balancing 
item

Given 
data

10=7+8 
 Balancing
item

160

194

351

1 070

285

2 060

150

95

170

500

150

1 065

10

40

60

200

60

370

0

59

121

370

75

625

20

10

15

50

25

120

10

99

181

570

135

995

Table 2: Correction of intermediate consumption of production units with the sum of compensation  
of employees and consumption of fixed capital using the output method

Regions

e
t
a
i

d
e
m
r
e
t
n
I

n
o
i
t
p
m
u
s
n
o
c

2

t
u
p
t
u
O

1

Given 
data

Given 
data

r
o
f
n
o
i
t
c
e
r
r
o
C

e
t
a
i

d
e
m
r
e
t
n

i

f
o
n
o
i
t
p
m
u
s
n
o
c

t
i

n
u
y
r
a
l
l
i
c
n
a

3

Using distri-
bution of 10 
regarding 
production 
units

e
t
a
i

d
e
m
r
e
t
n

i

n
o
i
t
p
m
u
s
n
o
c

d
e
t
c
e
r
r
o
C

4
4=2+3 
and 
autono-
mous 
correction 
for unit 1 
and 4

r
o
f
n
o
i
t
c
e
r
r
o
c

e
t
a
i

d
e
m
r
e
t
n

i

t
u
o
h
t
i
w
A
V
G

f
o
n
o
i
t
p
m
u
s
n
o
c

t
i

n
u
y
r
a
l
l
i
c
n
a

5

A
V
G
d
e
t
c
e
r
r
o
C

6

s
e
e
y
o
l
p
m
e

f
o
.
p
m
o
C

7

d
e
k
r
o
w
s
r
u
o
H

s
e
e
y
o
l
p
m
e
f
o

10

S
O
G

11

C
F
C

8

S
O
N

9

5=1-2 and no 
GVA for ancillary 
unit

6=1-4   
Balancing 
item

Given 
data

Given 
data

9=6-7-8     
Balancing 
item

Given 
data

11=6-7  
Balancing 
item

Ancillary unit

Production unit

Production unit

Production unit

Production unit

1

2

3

4

5

National corrected 
total
National original 
total
Difference

160

400

800

0

190

425

3 000

1 850

700

375

5 060

2 840

4 900

2 840

160

0

16

24

80

40

160

160

0

206

449

1 930

415

3 000

160

0

210

375

1 150

325

160

194

351

1 070

285

150

95

170

500

150

2 060

2060

1 065

2 060

2 060

1 065

10

0

0

0

0

0

X

X

X

X

20

10

15

50

25

120

10

99

181

570

135

995

120

995

  Manual on regional accounts methods

51

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4

General principles and methods  for the compilation of regional GVA by industry and regional GDP

method  would  still  be  considered  a  B-method  (see  par. 
3.9.1).  Table  4  gives  the  results  of  this  exercise.  It  is  clear 
that this method, when the ancillary unit or head office has 
the majority of employment, gives an overestimation of the 
GVA of an ancillary unit with low capital intensity and an 
underestimation of the production units with high capital 
intensity.  The  opposite  might  be  the  case  when  ancillary 
units  have  high  capital  intensity  and  the  production  units 
low capital intensity, e.g. for high tech distribution centres. 
However, in the short-term these problems cannot be solved. 

The  head  office  supplies  mainly  ancillary  services  to  the 
production units. If the head office is in a region different 
from  the  regions  where  the  production  units  are  resident, 
one could apply the method as previously explained. 

4.3.2. Value added of units without significant 
permanent labour 

It is obvious that employment is not an indicator that can 
be used to allocate GVA of enterprises to their sites without 
significant permanent labour. This implies the use of phys-
ical indicators, such as the regional distribution of kWh of 
electricity produced, barrels of extracted oil, number of m3 
of gas extracted etc. 

4.4. Transition from regional GVA to 
regional GDP 

4.4.1. Introduction

Output  is  to  be  valued  at  basic  prices.  Products  used  for 
intermediate  consumption  are  to  be  valued  at  purchasers’ 
prices at the time they enter the process of production. As 
a consequence, GVA per industry is valued at basic prices. 

Regional  GDP  is  valued  at  market  prices  by  adding  the 
regionalised  taxes less subsidies on products and  imports, 
and the Value Added Tax (VAT), to regional GVA at basic 
prices (see ESA 2010, par. 13.35).

Other taxes and subsidies linked to production, such as real 
estate tax, environmental taxes, motor vehicle tax and wage 
subsidies,  form  part  of  regional  GVA  at  basic  prices  and 
should be allocated to the local KAU or local unit where the 
production takes place. They should be distinguished from 
taxes  and  subsidies  on  products,  imports  and  VAT,  which 
are different in impact and need to be allocated separately 
for the estimation of regional GDP.

4.4.2. Regional allocation of Value Added Tax 
(VAT) and taxes and subsidies on products and 
imports 

Taxes  on  products  include,  amongst  others:  VAT,  import 
duties, excise duties on motor spirits, tobacco and alcohol, 
energy  levies,  taxes  on  passenger  cars  etc.  Subsidies  on 

products  include,  for  example:  subsidies  on  food,  public 
transport  subsidies,  research  and  development  (R&D) 
subsidies,  rent  subsidies,  subsidies  on  recreation,  culture 
and sport.

ESA 2010, par. 13.43 states that ‘by convention, these supra-
regional taxes and subsidies are allocated on the basis of the 
relative size of GVA of all industries in the region, valued at 
basic prices.’ 

Alternative  methods  of  regional  allocation  can  be  applied 
on  a  case-by-case  basis  for  territories  with  specific  fiscal 
systems,  resulting  in  significantly  different  rates  of  taxes 
and  subsidies  on  products  within  a  country  (ESA  2010, 
par.  13.43).

Alternative  methods  need  to  be  requested  by  the  Member 
States and authorised by Eurostat on a case-by-case basis. 

4.5. Regional GDP per capita and regional 
population

Regional GDP per capita plays an important role in the allo-
cation  of  the  EU  Structural  Funds  to  the  less  prosperous 
regions  (16).  This  section  devotes  attention  to  the  regional 
population. The definition of population is based on chapter 
11 of ESA 2010.

According to ESA 2010, par. 11.05, the regional population 
as used for regional accounts purposes is defined as follows: 
on a given date, the total population of a region consists of 
all persons, national or foreign, who are permanently settled 
in  the  economic  territory  of  the  country,  even  if  they  are 
temporarily absent from it. 

The paragraphs 11.06-11.08 in ESA 2010 provide informa-
tion  about  which  people  are  included  in  the  total  popula-
tion and which are not included for the national economic 
territory.  The  biggest  groups  concerned  are  members  of 
the  armed  forces  stationed  abroad  and  students  studying 
abroad. However, ESA 2010, chapter 13 par. 13.52 makes an 
exception to the main rule by allocating students and long-
term  patients  as  residents  of  the  host  region  in  the  home 
country if they stay there for more than one year.

If population data as per ESA 2010, par. 11.05 to 11.08 are 
not  available,  it  is  considered  acceptable  that  the  average 
regional  population  is  based  on  registered  or  similar 
regional population data. 

GDP per capita figures for the extra-regio territory will not 
be calculated (ESA 2010, par. 13.44). The reason is that there 
is no resident population in the extra-regio territory.

(16) In areas with a high proportion of commuters, regional GDP per inhabitant can be 

extremely high, particularly in economic centres such as London (United Kingdom), 
Vienna (Austria), Hamburg (Germany), Prague (Czech Republic) or Luxembourg, and 
relatively low in the surrounding regions, even if households’ primary income in these 
regions is very high. Regional GDP per inhabitant should, therefore, not be equated 
with regional primary income (Eurostat regional yearbook 2011).

52

Manual on regional accounts methods  

General principles and methods  for the compilation of regional GVA by industry and regional GDP 4

Table 3: Only available are national GVA, regional distribution of compensation and hours worked of 
employees and national GOS and an estimate for CFC of ancillary unit; compensation of employees gives 
distribution key of 9, using the income method

Regions

Ancillary unit
Production unit
Production unit
Production unit
Production unit
National

1
2
3
4
5

e
t
a
i

d
e
m
r
e
t
n
I

n
o
i
t
p
m
u
s
n
o
c

2

e
t
a
i

d
e
m
r
e
t
n

i

n
o
i
t
p
m
u
s
n
o
c

n
o
i
t
c
e
r
r
o
C

3

A
V
G

4

t
u
p
t
u
O

1

A
V
G
d
e
t
c
e
r
r
o
C

5

5=6+9

160
197
353
1 038
311
2 060

s
e
e
y
o
l
p
m
e

f
o
.
p
m
o
C

6
Given 
data
150
95
170
500
150
1 065

e
t
a
m

i
t
s
e
C
F
C

t
i

n
u
y
r
a
l
l
i
c
n
a

7

10

10

d
e
k
r
o
w
s
r
u
o
H

s
e
e
y
o
l
p
m
e
f
o

8
Given 
data
20
10
15
50
25
120

S
O
G

9

10
102
183
538
161
995

Table 4: Only available are national GVA, regional distribution of compensation and hours worked of 
employees and national GOS; hours worked by employees give distribution key of 9 using the income method

Regions

Ancillary unit
Production unit
Production unit
Production unit
Production unit
National

1
2
3
4
5

e
t
a
i

d
e
m
r
e
t
n
I

n
o
i
t
p
m
u
s
n
o
c

2

e
t
a
i

d
e
m
r
e
t
n

i

n
o
i
t
p
m
u
s
n
o
c

n
o
i
t
c
e
r
r
o
C

3

A
V
G

4

t
u
p
t
u
O

1

A
V
G
d
e
t
c
e
r
r
o
C

5

5=6+9

316
178
294
915
357
2 060

s
e
e
y
o
l
p
m
e

f
o
.
p
m
o
C

6
Given 
data
150
95
170
500
150
1 065

e
t
a
m

i
t
s
e
C
F
C

t
i

n
u
y
r
a
l
l
i
c
n
a

7

0

0

d
e
k
r
o
w
s
r
u
o
H

s
e
e
y
o
l
p
m
e
f
o

8
Given 
data
20
10
15
50
25
120

S
O
G

9

166
83
124
415
207
995

The  annual  average  of  head  counts  of  the  regional  total 
population  will  provide  an  appropriate  denominator  to 
enable comparisons.

A necessary condition is that the compilation method of the 
annual average population is the same for annual national 
and regional GDP per capita estimates. The methods for the 
compilation of the annual average population differ between 
countries because of the varying availability of population 
data sources. 

Monthly  or  quarterly  population  figures  are  preferred  for 
consistency  with  quarterly  national  GDP  per  capita  esti-
mates  and  annual  national  and  regional  GDP  per  capita 
estimates. 

The most important condition is that the sum of the annual 
regional  average  population  must  be  equal  to  the  annual 
national  average  population,  which  is  the  case  when  the 
same compilation method has been used at the national and 
regional levels.

The compilation of the annual average population may be 
based on the following methods:

1.  12 monthly averages.

2.  4 quarterly averages.

3.  The  average  of  the  population  at  January  1  of  two 

consecutive years.

4.  A mid-year estimate.

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53

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Applying the principles for the regional 
allocation of GVA in current prices to 
particular industries (NACE Rev. 2)

5

5.  Applying 

the principles 

for the regional 

allocation 

of GVA in 

current prices 

to particular 

industries (NACE 

Rev. 2)

5

Applying the principles for the regional allocation of GVA in current prices to particular industries

5.1. Introduction 

This  chapter  discusses  regional  GVA  estimates  for  indus-
tries where statisticians have encountered specific difficul-
ties  with  principles,  methods  and  data.  It  illustrates  the 
practical application of the concepts of ESA and the general 
principles of chapter 4. All the principles in chapter 4 apply 
to these industries and are referred to rather than reiterated 
in this chapter. 

This  chapter  also  gives  practical  guidelines,  for  instance 
for  GOS  (see  also  par.  3.9.1),  and  numerical  examples 
(par.    5.5.5.)  on  methods  and  data  for  the  industries 
concerned.  These  recommendations  should  be  applied 
across the European Union, improving the comparability of 
the estimates.

5.1.1. Industries covered

Regional tables of GVA by industry are based on NACE Rev. 
2 sections. Therefore GVA by industry should be evaluated 
according to this standard classification.

The  following  industries,  which  correspond  to  sections  of 
NACE Rev. 2, need further consideration:

B  Mining and quarrying

 — Real  estate  activities  have  the  important  element 
‘imputed rent of owner-occupied dwellings’. The element 
‘imputation’ especially needs clarification. 

These  industries  will  be  discussed  in  more  detail  in  the 
following paragraphs.

5.1.2. Other industries

Methods for agricultural accounts are covered in: Manual 
on the economic accounts for agriculture and forestry EAA/
EAF  97  (REV.  1.1).  This  manual  provides  comprehensive 
information on the regional accounts for agriculture. These 
accounts are based on a regulation (17) and are in line with 
ESA.  The  data  are  provided  to  Eurostat  at  NUTS  2  level. 
Regarding accuracy issues, see par. 3.9.2. 

Regarding the industries of sections C, G, I and M to T there 
are  fewer  difficulties  in  understanding  how  the  general 
principles  should  be  applied,  although  there  may  be  data 
and  other  practical  problems.  The  principles  described  in 
chapter 4 can be applied for these industries.

5.2. Mining and quarrying (Section B) 

Section  B  consists  of  the  following  activities  (see  NACE 
Rev. 2, A*88):

D  Electricity, gas, steam and air conditioning supply

05  Mining of coal and lignite

E  Water  supply;  sewerage,  waste  management  and  reme-

06  Extraction of crude petroleum and natural gas

diation activities

F  Construction

H  Transportation and storage

J 

Information and communication

K  Financial and insurance activities

L   Real estate activities 

The main issues specific to these industries are as follows:

 — Mining and quarrying activity is usually located in the 
regional  territory  of  a  country.  However,  some  coun-
tries do have an element of production in the extra-regio 
territory. 

 — Activities of sections D, E and J are all affected by cross-
border activities using a network of cables, pipelines or 
wireless networks. 

 — Construction may take place in a region different from 

the fixed establishment of the producer. 

 — Transportation  includes  an  element  of  cross-border 

activity by road, rail, water and air. 

 — Financial  intermediation  services  indirectly  measured 

(FISIM) face data issues. 

07  Mining of metal ores

08  Other mining and quarrying

09  Mining support service activities

Discussion  here  will  focus  on  industry  06,  Extraction  of 
crude petroleum and natural gas. In this case we have the 
general  problem  of  multiregional  enterprises  with  (some-
times) unmanned production stations, ancillary units and 
head  offices.  The  production  stations  are  located  in  the 
regional territory or in the extra-regio territory and extract 
crude  petroleum  and  natural  gas.  The  majority  of  the 
production of crude petroleum and natural gas will be allo-
cated to these production units, whether they are manned or 
unmanned. If the production unit is permanently situated 
at the continental shelf, or in international waters under the 
country’s sovereignty, then the production and value added 
will be allocated to the extra-regio territory. However, value 
added also has to be allocated to the ancillary units and the 
head office. For this general problem reference can be made 
to par. 4.3, which provides the principles for the allocation 
of  value  added  to  the  aforementioned  units.  The  section 
about ‘value added of ancillary units (and head offices) of a 

(17) Regulation (EC) No 138/2004 of the European Parliament and of the Council of 
5 December 2003 on the economic accounts for agriculture in the Community.

56

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5

multiregional enterprise’ and the classification of A, B and 
C-methods are especially relevant. 

Loss-making  units  in  this  industry  may  be  difficult  to 
identify  and  measure  correctly  because  they  are  part  of  a 
multiregional  enterprise.  Most  methods  using  regional 
indicators  for  the  regional  allocation  of  GVA  or  GOS  of  a 
multiregional enterprise implicitly assume that GOS has the 
same  sign  (positive  or  negative)  in  all  production  units  of 
the enterprise.

5.3. Electricity, gas, steam and air 
conditioning supply (Section D) 
and Water supply; sewerage, waste 
management and remediation  
activities (Section E)

principles and A, B and C-classification, provided in chap-
ters 3 and 4. Therefore GVA should not be allocated to the 
regions of the consumers. 

Recent developments are that production, distribution and 
trade in electricity and gas are increasingly done by different 
enterprises. This makes the description for these industries 
more  complex  because  there  are  enterprises  that  have  an 
output of electricity and gas, enterprises that distribute elec-
tricity and gas (which is a service) and trading companies 
that produce a margin. Sometimes enterprises combine part 
of all of these activities. It might be relevant to distinguish, 
if  possible,  enterprises  that  produce  (NACE  Rev.  2,  35.11), 
transmit  (35.12),  distribute  (35.13)  and  trade  (35.14)  elec-
tricity. For the production, distribution and trade of gas we 
should distinguish the manufacture of gas (35.21), distribu-
tion of gaseous fuels through mains (35.22), and trade of gas 
through mains (35.22).

Sections  D  and  E  consist  of  the  following  activities  (see 
NACE Rev. 2, A*88):

5.4. Construction (Section F)

35  Electricity, gas, steam and air conditioning supply

36  Water collection, treatment and supply

37  Sewerage

38  Waste  collection,  treatment  and  disposal  activities; 

materials recovery

39  Remediation  activities  and  other  waste  management 

services

Section  F  consists  of  the  following  activities  (see  NACE 
Rev. 2, 3-digit level): 

41.1  Development of building projects 

41.2  Construction of residential and non-residential build-

ings 

42.1  Construction of roads and railways 

42.2  Construction of utility projects 

Discussion  here  will  focus  on  industries  35  and  36  which 
often have different kinds of local units. 

42.9  Construction of other civil engineering projects 

43.1  Demolition and site preparation 

Distinctive features of industries 35 and 36 are:

43.2  Electrical, plumbing and other construction installa-

 — They  have  a  few  large  capital-intensive  units  such  as 
power stations, parks of windmills and solar collectors, 
but  they  also  have  a  large  number  of  labour-intensive 
administrative  local  units  (ancillary  units  and  head 
offices).

 — They also have distribution networks of pipelines (gas, 
water,  steam,  air  conditioning)  and  cables  (electricity), 
which may cross regional boundaries. 

tion activities 

43.3  Building completion and finishing 

43.9  Other specialised construction activities 

The  construction  industry  has  some  distinctive  features. 
They are:

—  Subcontracting is a feature of the construction industry. 

—  The  output  of  the  subcontractors  is  intermediate 

 — In general these industries consist of a small number of 

consumption for the main contractor.

enterprises (electricity production). 

 — Often electricity will be produced by enterprises that are 
different  from  the  enterprises  that  distribute  the  elec-
tricity.

 — The  leading  enterprises  in  these  industries  are  active 
throughout  the  entire  national  territory  or  at  least  in 
several regions.

GVA of these industries must be allocated to the residence 
of the local producer and ancillary units and the head office 
of  the  enterprise  (multiregional  unit)  according  to  the 

—  The main contractor is generally involved for more than 
one  year  in  projects  for  constructing  buildings,  roads, 
bridges  etc.  The  subcontractors  will  rarely  be  involved 
for more than one year.

—  Consortia  in  building  construction  and  civil  engi-
neering are a typical feature of this industry. These are 
formed  by  several  enterprises  for  a  particular  purpose 
for a limited period of time.

—  Construction  projects  are  done  at  building  sites 
which  could  be  located  either  in  the  region  where  the 

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Applying the principles for the regional allocation of GVA in current prices to particular industries

enterprises have their permanent establishment(s) or in 
other regions or even in other countries.

—  The  production  processes  can  differ  significantly.  For 
example,  a  dwelling  might  be  built  with  prefabricated 
elements or with a traditional construction. This implies 
a  different  cost  structure  and  labour  input.  Another 
example is the difference in production processes for the 
construction of residential buildings and the construc-
tion of railways.

6. 

7. 

—  ESA 2010, par. 13.21c states: ‘major construction projects 
undertaken by contractors from other regions are regis-
tered as a separate local KAU’. 

—  The  population  of  construction  enterprises  consists 
generally of a large number of small enterprises, which 
implies the use of samples or registrations. The construc-
tion industry can be classified according to size class of 
the  number  of  employed  persons  (18).  The  division  in 
percentages for the EU-27 for employed persons in 2005 
is as follows:

•	 1-9 employed persons:  

•	 10-49 employed persons: 

•	 50-249 employed persons: 

•	 250 or more employed persons:  

The following conclusions may be drawn:

42.3 %

30.5 %

15.4 %

11.9 %

1. 

 Building sites should be treated as notional units of an 
enterprise when they are present for a year or more  his 
guideline  is  for  regional  purposes  based  on  ESA  2010, 
par.  2.09).  It  is  clear  that  only  when  they  meet  this 
requirement are building sites likely to have the statis-
tical information required. 

2. 

 Uniregional units may become multiregional units when 
they work for a year or longer as the main contractor on 
a building site which is located in a region different from 
their permanent establishment in another region.

3. 

 Consortia must be counted as local units.

4. 

 There  is  one  main  criterion  for  allocating  value  added 
to  the  building  site.  That  is  that  the  enterprises  have 
to work for a year or longer on the building site. If the 
period is shorter than one year, value added should be 
allocated to the residence of the parent local unit.

5.  The  other  criterion  is  the  size  of  the  construction 
project. However, we also have to think of the consist-
ency between the output of the main contractors in the 
construction industry in a region and the fixed capital 
formation  in  the  same  region.  Therefore  the  construc-
tion of a dwelling that lasts a year or longer, which might 

(18) Eurostat, Number of persons employed by enterprise size-class in the EU-27 (% of 

sectorial total) 2005, Code: tin00052, update 18-04-2012.

be seen as a small project, has for reasons of consistency 
to  be  allocated  to  the  region  where  the  building  takes 
place. 

 Because of the completely different nature of the produc-
tion processes of the activities under the heading of the 
construction industry, it is recommended to compile the 
data at the 3-digit level. 

 From the breakdown by size in the previous paragraph it 
is clear that the majority of enterprises in the construc-
tion industry are small. These small enterprises do not 
generally  encounter  the  problems  of  the  larger  enter-
prises  with  ancillary  units,  head  offices  and  building 
sites.

5.4.1. Allocation of GVA 

Data for the construction industry can generally be derived 
from the SBS or administrative sources. Generally speaking 
one can use the same principles, mentioned in par. 4.3, to 
allocate  GVA  to  regions.  One  may  distinguish  production 
units, ancillary units and head offices for the larger enter-
prises,  which  might  be  uniregional  but  become  multire-
gional  when  they  work  on  a  building  site  in  a  different 
region  for  a  year  or  longer. The  only  difference  is  that  the 
production units might be building sites in regions that are 
different from the region of the permanent local unit(s). So 
the main question is whether data or indicators are available 
for a proper allocation of value added to the building site. 

The  following  information  might  be  available  in  SBS  or 
alternative sources:

1.  An appropriate sample, designed for national estimates, 
might  be  drawn  for  smaller  enterprises.  The  following 
points have to be taken into account: 

a.  It may be assumed that these small enterprises gener-
ally work locally or operate in other regions for less 
than  one  year.  As  a  consequence  these  data  will  be 
allocated to the region of the permanent local unit.

b.  It depends on the sample design and (non-) response 
rate,  whether  the  distribution  of  the  grossed-up 
regional  GVA  data  can  be  used,  which  is  in  fact  a 
bottom-up  method.  This  might  be  classified  as  an 
A-method  when  the  sample  covers  the  small  units 
sufficiently (see also par. 3.9.1). It will become a B or 
even C-method when the sample does not sufficiently 
cover the small units.

c.  If  the  regional  distribution  of  the  grossed-up  data 
of the sample cannot be used, the national estimate 
of SBS data for small enterprises should be allocated 
to  regions  using  indicators,  which  is  a  top-down 
method. The indicator is usually the regional distri-
bution of the number of employed persons (and not 
only  employees).  The  compensation  of  employees  is 
unsuitable when industry data are used because the 

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5

share  of  self-employed  persons  in  the  total  number 
of  persons  employed  in  the  construction  industry 
is generally relatively high. However, in a combined 
sector-industry  approach,  self-employed  persons 
might  be  an  acceptable  basis  for  the  regional  allo-
cation  of  GVA  for  the  household  sector.  For  the 
construction  industry,  one  may  expect  relatively 
stable productivity data per employed person. When 
this is the case, this method becomes a B-method. 

d.  Administrative  data  might  be  used  instead  of  the 
sample  for  small  enterprises  in  the  construction 
industry.  The  data  must  include  the  region  of  the 
residence of the enterprise and not the region of the 
residence of the auditor. This might be regarded as a 
bottom-up  method  and  classified  as  an  A-method. 
When  the  administrative  data  do  not  adequately 
cover GVA of the small enterprises, because of gaps 
in or the timeliness of the information, this method 
will be classified as a B-method or a C-method if the 
gaps are big or the timeliness is unacceptable. 

2.  Larger enterprises are covered comprehensively in  SBS 
or  administrative  data.  These  enterprises  are  usually 
legal  entities  and  not  unincorporated  enterprises, 
which implies that self-employed persons do not have a 
major role in them. The population of these enterprises 
consists  of  uniregional  and  multiregional  enterprises. 
The following points have to be taken into account:

a.  Uniregional enterprises that, as the main contractor, 
only work in their home region or in other regions for 
less  than  one  year  do  not  pose  any  problems.  Value 
added will be allocated to their home region and this 
method will be classified as an A-method.

b.  Some uniregional enterprises also work as the main 
contractor  on  a  building  site  in  a  region  other  than 
their  home  region  for  a  year  or  longer.  This  implies 
that  the  uniregional  unit  becomes  a  multiregional 
unit. The value added will be allocated to the region 
according  to  the  guidelines  for  multiregional  units 
(see c).

c.  A  multiregional  enterprise  consists  of  permanent 
units  that  may  be  production  units  (prefabricated 
elements  for  the  market),  ancillary  units,  a  head 
office, and building sites where they work for a year 
or  longer.  The  principles  and  classification  of  A,  B 
and C-methods given in par.3.9 apply for the units at 
points b and c. With regard to the indicators which 
can be used, one might have the following considera-
tions:

i.  The role of unincorporated enterprises is minor. 
This  implies  a  better  indication  of  the  regional 
distribution  of  the  activity  of  these  enterprises 
by  the  regional  distribution  of  compensation  of 

employees and the number of employees of these 
enterprises. 

ii.  However,  the  capital  element  in  value  added  of 

these enterprises might be considerable.

iii.  The  output  of  these  enterprises  (where  they  are 
the  main  contractor)  in  a  region  can  be  related 
to fixed capital formation in that region. This is 
not  the  case  for  the  output  of  sub-contractors. 
Output of the main contractors might also have 
a close relationship with building permits when 
the  variables,  address  (region),  value  of  the 
project, and period of building, are available on 
the building permit.

d.  The difference between the aggregate of the regional 
totals of SBS and the corresponding national accounts 
total  can  be  allocated  to  regions  according  to  the 
principles described in chapter 4.

5.5. Transportation and storage 
(Section H) and Information and 
communication (Section J)

Sections H and J consist, amongst others, of the following 
activities (see NACE Rev. 2, 2 and 3-digit level): 

Section H
49  Land transport and transport via pipelines
49.1   Passenger rail transport, interurban
49.2  Freight rail transport
49.3  Other passenger land transport
49.4  Freight transport by road and removal services
49.5  Transport via pipeline

50  Water transport

50.1  Sea and coastal passenger water transport
50.2  Sea and coastal freight water transport
50.3  Inland passenger water transport
50.4  Inland freight water transport

51  Air transport

51.1   Passenger air transport
51.2   Freight air transport and space transport

52  Warehousing and support activities for transportation

52.1  Warehousing and storage
52.2  Support activities for transportation

53 Postal and courier activities

53.1   Postal activities under universal service obligation
53.2  Other postal and courier activities

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Section J

61  Telecommunications

61.1   Wired telecommunications activities

61.2  Wireless telecommunications activities

61.3   Satellite telecommunications activities

61.9   Other telecommunications activities

There  are  severe  conceptual  and  practical  problems  for 
the  transportation,  storage  and  telecommunication  indus-
tries which require careful treatment. Comprehensive local 
data for these industries do not exist in any Member States. 
However,  there  are  usually  some  transport  enterprises  in 
the public sector and data may be available for these.

There are also some transportation sub-groups where local 
KAUs  or  local  units  may  present  problems,  e.g.  for  rail 
transport of passengers and freight. Specific features of this 
industry  are:  the  existence  of  a  network  of  railway  lines; 
stations; traffic centres; the trains; the passengers departing 
or arriving at the station; freight loaded or unloaded; main-
tenance  of  the  railway  network  and  trains  by  supporting 
units; the head office etc. 

the ship docks if a local unit is there, or alternatively it could 
be the office paying wages or arranging cargo and supplies. 

This  allocation  may  result  in  some  apparent  anomalies. 
Mobile  equipment  may  be  allocated  to  a  region  different 
from that in which it mainly operates, even when the equip-
ment  has  been  there  for  a  long  time.  For  instance,  ships 
sailing in international waters may be allocated to an inland 
unit.

Very  rarely,  there  may  not  be  a  home  base  local  unit,  for 
example,  inland  waterway  shippers  who  sail  on  their  own 
account and do not have any land-based address. In these 
exceptional circumstances the mobile unit may be allocated 
to the extra-regio territory. 

Pipeline  networks  have  to  be  attached  to  a  local  unit 
according to the residence principle in chapter 2, par. 2.2.4. 
Their GVA should be allocated to the local units responsible 
for the activity.

SBS  or  administrative  sources  are  available  for  the  afore-
mentioned industries. The principles and the A, B, C-classi-
fication explained in chapters 3 and 4 apply to these indus-
tries.

Because  of  their  different  nature  the  following  groups  are 
distinguished:

5.5.2. Rail transport

—  Land and water transport (49.3, 49.4, 49.5, and 50).

—  Rail and air transport (49.1, 49.2, and 51).

—  Support activities for transportation (52.2).

—  Postal and courier activities (53). 

—  Telecommunications (61).

One  should  be  aware  that  the  operation  of  railway  infra-
structure has to be classified to division 52.21 and the trans-
portation of passengers or freight in, respectively, 49.1 and 
49.2. However, in practice information might only be avail-
able for a combination of these activities.

5.5.1. Land and water transport

This  group  consists  of  local  and  long-distance  passenger 
and  freight  transport  by  road,  transport  via  pipeline, 
inland waterway and maritime transport. They are grouped 
together because an approach based on local KAUs or local 
units is appropriate here.

The production units are local KAUs or local units. Mobile 
equipment  and  pipeline  networks  should  be  attached  to 
these production units.

Mobile  equipment  cannot  be  production  units  (see  ESA 
2010,  par.  2.05).  They  must  be  attached  to  the  local  unit 
where they are based or from which they are deemed to be 
operated. For example, lorries and buses should be allocated 
to the depot at which they are based. Ships should be allo-
cated to their home base local unit. This could be the place 

In the past railway companies in the EU generally consisted 
of  companies  for  interurban  transport  that  carried  out 
passenger  and  freight  transport,  including  the  mainte-
nance of the railway network, the trains, the stations, traffic 
control and railway capacity allocation. 

Some  countries  have  split  their  national  railway  company 
into  separate  companies,  dealing  with 
infrastructure 
(NACE  Rev.  2,  52.2)  and  transportation  activities  (NACE 
Rev. 2, 49.1 and 49.2) respectively. Other countries have not 
done so, and as a consequence the national railway company 
still carries out all previously mentioned activities. 

It should be mentioned that, according to the basic classifi-
cation rules of NACE Rev. 2 and ESA 2010, a railway enter-
prise should be split into local KAUs using the relevant divi-
sions of NACE Rev. 2. Whether this can be achieved depends 
on practical considerations, which may differ between EU 
Member States. 

In general, we might expect the following situations:

1.  Countries that have split infrastructure and transporta-

tion:

a.  The  management  of  the  railway 

infrastructure 
(mainly  rail  infrastructure  management,  capacity 
allocation  and  traffic  control)  is  managed  by  a  legal 
entity (generally government-owned).

b.  Transportation  of  passengers  and  freight  (mainly 
transport,  employing  train  drivers  and  conduc-
tors,  operation  of  stations,  station  facilities,  train 

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maintenance).  Sometimes  transportation  of  passen-
gers and freight has also been split, and some of the 
activities may be outsourced. 

2.  Countries that have not split infrastructure and trans-

portation. 

3.  Countries in the process of splitting infrastructure and 

transportation.

In  all  situations  we  have  to  deal  with  multiregional  units 
that have production units dealing with the main activity, 
and ancillary units and head offices. For the regionalisation 
of the GVA of the railway company, the rules of chapter 4 
should be applied wherever possible. In practice, informa-
tion  about  the  consumption  of  fixed  capital  by  ancillary 
units  and  head  offices  of  the  railway  companies  may  be 
scarce. In that case the following methods might be applied. 

Re 1.a:

GVA of the companies that manage the railway infrastruc-
ture  consists  mainly  of  compensation  of  employees  and 
consumption of fixed capital. The latter is generally the main 
part of GVA. If possible, the regionalisation should be based 
on these two elements. The annual accounts of the railway 
company may provide information on these elements.

—  The regionalisation of compensation of employees could 
be based on the regional distribution of compensation of 
employees (would be an A-method), or the total number 
of hours worked by employees (would be an A-method 
if there  are no regional differences in salaries  paid  per 
employee),  or  the  total  number  of  employed  persons 
(would be a B-method if part-time work is minor and 
regional  differences  in  wages  and  salaries  are  limited). 
It  would  be  a  C-method  if  the  conditions  of  the  A  or 
B-method are not fulfilled.

—  The regionalisation of gross operating surplus could be 
based on a physical indicator, such as the regional distri-
bution of the length of the railway tracks (this would be 
a B-method). It is assumed that the railway tracks have 
the  largest  share  of  consumption  of  fixed  capital  and 
that net operating surplus is relatively minor. It should 
be noted that the railway tracks have to be assigned to a 
related local unit. 

Re 1.b:

With  regard  to  the  transportation  of  passengers,  there  is 
unlikely  to  be  enough  data  for  a  bottom-up  approach  as 
most of these enterprises are large and multiregional. Since 
mobile  equipment  generates  most  of  the  GVA,  it  is  both 
important to treat it correctly, and undesirable to allocate it 
arbitrarily to a single unit. However, we can use a pseudo-
top-down approach to compile regional aggregates without 
identifying indicators based on local units.

—  For compensation of employees, see 1.a above.

 — Gross operating surplus should be allocated to regions 
according  to  indicators  relating  to  the  activity  of  the 
trains.  Passenger  and  freight  transport  should  be  esti-
mated  separately  if  possible.  The  indicators  proposed 
are passengers and freight, loaded and unloaded in the 
stations  of  each  region,  carried  by  enterprises  contrib-
uting to national GVA (this would be an A-method). It 
is  assumed  that  consumption  of  fixed  capital  by  ancil-
lary units and head offices is estimated implicitly by this 
method. 

Re 2:

If  the  railway  company  manages  both  the  railway  infra-
structure and the transportation of passengers and freight, 
it is recommended to distinguish at least three elements of 
GVA:  compensation  of  employees,  consumption  of  fixed 
capital and net operating surplus. 

 — Compensation of employees should be allocated to the 
region where the people are employed (this would be an 
A-method).

 — The regional allocation of consumption of fixed capital 
could be based on the regional distribution of the length 
of the railway tracks (this would be a B-method).

 — The  regional  allocation  of  net  operating  surplus  could 
be based on the regional distribution of passengers and 
freight,  loaded  and  unloaded  in  the  stations  of  each 
region,  carried  by  enterprises  contributing  to  national 
GVA  (this  would  be  an  A-method).  It  is  assumed  that 
consumption of fixed capital by ancillary units and head 
offices is estimated implicitly by this method.

Re 3:

The  main  condition  for  the  transition  from  situation  2  to 
situation  1  is  that  the  regional  distribution  of  the  sum  of 
GVA of industries 49.1, 49.2 and 52.2 should not change too 
much when railway companies are split into companies that 
manage infrastructure and companies that manage trans-
portation.  However,  some  activities  may  be  outsourced  or 
sold abroad, and this might affect the regional GVA of these 
industries.

5.5.3. Air transport

This activity includes passenger air transport (51.10), freight 
air transport (51.21) and space transport (51.22). 

The main activities of (51.10) are: transportation of passen-
gers  by  air  over  regular  routes  and  on  regular  schedules; 
charter flights for passengers; scenic and sightseeing flights; 
renting  of  air  transport  equipment  with  operator  for  the 
purpose of passenger transportation; and transportation of 
passengers by aero clubs for instruction or pleasure.

  Manual on regional accounts methods

61

5

Applying the principles for the regional allocation of GVA in current prices to particular industries

The main activities of (51.21) are: transportation of freight 
by  air  over  regular  routes  and  on  regular  schedules;  non-
scheduled  transportation  of  freight  by  air;  and  renting  of 
air  transport  equipment  with  operator  for  the  purpose  of 
freight transportation.

The  main  activities  of  (51.22)  are:  launching  of  satellites 
and space vehicles; and space transportation of freight and 
passengers. 

Airport  activities,  such  as  airport  and  air  traffic  control 
activities, and the loading and unloading of goods or passen-
gers’ luggage, belong to NACE Rev. 2 (52.2). In general the 
airline companies do not carry out these support activities. 

Also  included  are  other  services  necessary  to  support  the 
universal  service  obligation.  The  industry  also  includes 
firms  operating  outside  the  scope  of  a  universal  service 
obligation (NACE Rev. 2, division 53.2). 

The  main  characteristic  of  the  designated  universal 
services providers is that they include multiregional enter-
prises with a great variety of local units (see above). More-
over, postal and courier activities are generally very labour-
intensive, and the share of part-time work in these activities 
might change over time. The sorting and processing facili-
ties  can  however  be  very  capital-intensive.  It  is  therefore 
recommended to apply the income method for this activity. 
Applying this method means: 

Airline companies are usually multiregional companies for 
which the rules of chapter 4 have to be applied. If there is 
not  enough  information  available  to  apply  the  production 
approach, the income method may be used for the region-
alisation  of  the  GVA  of  multiregional  airline  companies. 
Applying this method means:

1. 

1.  Compensation of employees should be allocated to the 
region  where  the  people  are  employed.  The  regional 
distribution  could  be  based  on  the  regional  distribu-
tion  of  compensation  of  employees  (this  would  be 
an  A-method),  the  total  number  of  hours  worked  by 
employees  (would  be  an  A-method  if  there  are  no 
regional differences in salaries paid per employee), or the 
total number of employed persons (would be a B-method 
if  part-time  work  is  minor  and  regional  differences  in 
wages and salaries are limited). If the conditions of the 
A- or B-method are not fulfilled, a C-method will apply.

2.  Gross operating surplus should be allocated to regions 
according  to  indicators  relevant  to  the  activity  of  the 
airline  company.  Passenger  and  freight  transport  by 
the  airline  company  should  be  estimated  separately  if 
possible.  The  indicators  proposed  are  passengers  and 
freight,  loaded  and  unloaded  in  the  airports  of  each 
region,  carried  by  enterprises  contributing  to  national 
GVA  (this  would  be  an  A-method).  An  estimate  for 
the  airline  company  based  on  its  total  activity  (both 
passenger and freight transport) would be a B-method. 
It is assumed that consumption of fixed capital by ancil-
lary units and head offices is estimated implicitly by this 
method. 

5.5.4. Postal and courier activities

This industry includes the activities of postal services oper-
ating under a universal service obligation by one or more 
designated  universal  service  providers  (NACE  Rev.  2, 
division 53.1). The activities include the use of the universal 
service  infrastructure,  including  retail  locations,  sorting 
and processing facilities, and carrier routes to pick up and 
deliver the mail. The delivery can include letter-post (letters, 
postcards), printed papers (newspapers, periodicals, adver-
tising  items  etc.),  small  packets,  goods  or  documents. 

 Compensation of employees should be allocated to the 
region  where  the  people  are  employed.  The  regional 
distribution  could  be  based  on  the  regional  distribu-
tion  of  compensation  of  employees  (this  would  be 
an  A-method),  the  total  number  of  hours  worked  by 
employees  (would  be  an  A-method  if  there  are  no 
regional  differences  in  salaries  paid  per  employee), 
or  the  total  number  of  employed  persons  (would  be 
a  B-method  if  part-time  work  is  minor  or  about  the 
same  in  each  region  and  regional  differences  in  wages 
and  salaries  are  limited).  If  the  conditions  of  the  A  or 
B-method are not fulfilled a C-method will apply.

2. 

 Gross  operating  surplus  might  be  allocated  to  regions 
using physical indicators, such as the regional distribu-
tion of the number of letters and parcels. This would be 
a B-method.

5.5.5. Telecommunications

The regionalisation of all the different activities under the 
heading of telecommunications will be treated in the same 
way. The main rule is that the value added of telecommu-
nication  enterprises  using  infrastructure  such  as  telecom-
munication  lines,  and  networks  of  antennas  for  wireless 
communication, must be allocated to the local unit respon-
sible for managing the infrastructure. 

Telecommunication  enterprises  are  mainly  large  multi-
regional  enterprises  consisting  of  a  head  office,  mainly 
managing the fixed and/or mobile network, a large number 
of telephone shops supplying services and selling telephones 
and  contracts  on  behalf  of  the  enterprise,  and  more  tech-
nical ancillary units. The shops might be seen as a secondary 
activity of the enterprise. Usually, comprehensive data are 
only available at enterprise level and not at local unit level. 
With regard to the shops, data are generally only available 
on  compensation  of  employees,  hours  worked,  and  the 
number of employees. 

For a better understanding, we will examine the following 
example, starting with a benchmark table for a mobile tele-
phone  enterprise.  The  company  consists  of  a  production 
unit / head office that is responsible for the mobile network. 

62

Manual on regional accounts methods  

Applying the principles for the regional allocation of GVA in current prices to particular industries

5

Besides  that  the  enterprise  owns  retail  shops  in  different 
regions.  The  shops  sell  mobile  telephones  and  make  up 
mobile  phone  subscriptions.  In  the  benchmark  table  full 
information is available for each local unit. Table 1 might be 
seen as the benchmark table.

In  Table  1,  the  consumption  of  fixed  capital  is  completely 
allocated  to  the  region  of  the  head  office,  because  the 
head  office  is  responsible  for  maintaining  the  network  of 
antennas. The retail shops generate a trade margin for their 
work. It is assumed that they have not invested heavily in 
capital  goods,  and  therefore  do  not  have  consumption  of 
fixed capital.

Table 1: Original data

n
o
i
t
p
m
u
s
n
o
c
e
t
a
i

d
e
m
r
e
t
n
I

2

Regions

t
u
p
t
u
O

1

Given 
data

Given 
data

130

115

270

100

80

210

3 000

1 800

200

3 715

150

2 340

0

Retail shops

Retail shops

Retail shops

Production 
unit / head 
office

Retail shops

National

1

2

3

4

5

e
t
a
i

d
e
m
r
e
t
n

i

n
o
i
t
c
e
r
r
o
C

n
o
i
t
p
m
u
s
n
o
c

3

Using 
distri-
bution 
of 9

s
e
e
y
o
l
p
m
e
f
o
.
p
m
o
C

6

A
V
G
d
e
t
c
e
r
r
o
C

5

C
F
C

7

S
O
N

8

s
e
e
y
o
l
p
m
e
f
o
d
e
k
r
o
w
s
r
u
o
H

9

k
c
o
t
s
l
a
t
i

p
a
C

10

Given 
data

7= 
10 % of 
10

8= 
4-6-7

Given 
data

Given 
 data

25

30

50

500

40

645

0

0

0

150

0

150

5.0

5.0

10.0

2.6

3.2

4.9

0

0

0

550.0

40.0

1 500

10.0

580.0

4.8

55.5

0

1 500

r
u
o
h
r
e
p
n
o
i
t
a
s
n
e
p
m
o
C

s
e
e
y
o
l
p
m
e
f
o
d
e
k
r
o
w

11

11=
6/9

9.6

9.4

10.2

12.5

8.3

11.6

t
n
e
i
c

ffi
e
o
c
l
a
t
i

p
a
C

12

e
t
o
u
q
n
o
i
t
p
m
u
s
n
o
C

13

f
o
n
o
i
t
a
s
n
e
p
m
o
c
f
o
e
r
a
h
S

A
V
G
n

i
s
e
e
y
o
l
p
m
e

14

A
V
G
n

i
C
F
C
f
o
e
r
a
h
S

15

A
V
G
n

i
S
O
N
f
o
e
r
a
h
S

16

12=
10/4

13=
2/1*100

14= 
6/4*100

15=
7/4*100

16=
8/4*100

0.0

0.0

0.0

1.3

0.0

1.1

77

70

78

60

75

63

83

86

83

42

80

47

0

0

0

13

0

11

17

14

17

46

20

42

A
V
G

4

4= 
1-2

30

35

60

1 200

50

1 375

Average margin ancillary units

1.21=175/145

  Manual on regional accounts methods

63

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5

Applying the principles for the regional allocation of GVA in current prices to particular industries

Let  us  now  assume  a  more  realistic  situation,  in  which 
production  statistics  are  only  available  for  the  enter-
prise as a whole. Thus we only have a total value for their 
output,  intermediate  consumption,  GVA,  compensation 
of employees, consumption of fixed capital, and hence net 
operating surplus. For the enterprise the regional distribu-
tion of wages and salaries, hours worked by employees, and 
the number of employees are also available. 

In this case we can follow the general procedure of par.  4.3.1 
regarding  the  imputation  of  GVA  for  ancillary  units. 
However, one  might assume that the retail shops generate 

a trade margin and therefore probably have a net operating 
surplus. This implies that compensation of employees of the 
retail shops has to be corrected by a factor ‘GVA/compensa-
tion of employees’, which can be obtained from independent 
comparable  retail  shops.  In  this  example  case  we  have  a 
correction  factor  of  1.21.  If  we  apply  this  factor  to  wages 
and  salaries  we  can  impute  a  negative  correction  of  inter-
mediate  consumption  for  the  retail  shops,  and  a  positive 
correction of intermediate consumption for the head office. 
The resulting corrected GVA in Table 2 is close to the orig-
inal data in the benchmark Table 1. The method described 
would be an A-method. 

Table 2: Correction of intermediate consumption with average margins

e
t
a
i

d
e
m
r
e
t
n
I

n
o
i
t
p
m
u
s
n
o
c

2

e
t
a
i

d
e
m
r
e
t
n

i

n
o
i
t
p
m
u
s
n
o
c

n
o
i
t
c
e
r
r
o
C

3

t
u
p
t
u
O

1

A
V
G

4

Given 
data

Given 
data

3=6*margin 
for ancillary 
units

4=1-2

0

0

0

0

0

0

-30.2

-36.2

-60.3

0

0

0

A
V
G
d
e
t
c
e
r
r
o
C

5

5=6+7 
+8 
and 
5=4-3

30.2

36.2

60.3

3 715

2 340

175

1 375

1 200

500

0

0

-48.3

0

3 715

2 340

0

1 375

48.3

1 375

40

645

s
e
e
y
o
l
p
m
e

f
o
.
p
m
o
C

6

C
F
C

7

S
O
N

8

f
o
d
e
k
r
o
w
s
r
u
o
H

s
e
e
y
o
l
p
m
e

9

k
c
o
t
s
l
a
t
i

p
a
C

10

Given 
data

7=10 % 
of 10

8= 
5-6-7

Given 
data

Given 
data

25

30

50

0

0

0

150

0

150

5.2

6.2

10.3

550

8.3

580

2.6

3.2

4.9

0

0

0

40

1 500

4.8

0

55.5

1 500

r
e
p
n
o
i
t
a
s
n
e
p
m
o
C

f
o
d
e
k
r
o
w

r
u
o
h

s
e
e
y
o
l
p
m
e

11

11= 
6/9

9.6

9.4

10.2

12.5

8.3

11.6

t
n
e
i
c

ffi
e
o
c
l
a
t
i

p
a
C

12

f
o
n
o
i
t
a
s
n
e
p
m
o
c

A
V
G
n
s
e
e
y
o
l
p
m
e

f
o
e
r
a
h
S

s
r
u
o
h
r
e
p
A
V
G

f
o
d
e
k
r
o
w

s
e
e
y
o
l
p
m
e

s
r
u
o
h
r
e
p
S
O
N

f
o
d
e
k
r
o
w

s
e
e
y
o
l
p
m
e

14

15

16

n
o
i
t
p
m
u
s
n
o
C

e
t
o
u
q

13

12= 
10/5

13=
2/1*100

14=
6/5*100

15=5/9

16=8/9

0

0

0

1.3

0

1.1

X

X

X

63

X

63

83

83

83

42

83

47

11.6

11.3

12.3

2.2

1.9

2.1

30

13.8

10.1

24.8

1.7

10.5

Regions

Retail shops

Retail shops

Retail shops

Production 
unit / head 
office

Retail shops

National

1

2

3

4

5

Table 3: Regionalisation using compensation of employees, hours worked by employees,  
or number of employees

e
t
a
i

d
e
m
r
e
t
n

i

n
o
i
t
c
e
r
r
o
C

n
o
i
t
p
m
u
s
n
o
c

3

-
n
o
c
e
t
a
i

d
e
m
r
e
t
n
I

n
o
i
t
p
m
u
s

2

Given
data

t
u
p
t
u
O

1

Given
data

n
o
d
e
s
a
b
A
V
G
d
e
t
c
e
r
r
o
C

8
f
o
n
o
i
t
u
b

i
r
t
s
i

d

5

53

64

107

1 066

85

1 375

n
o
d
e
s
a
b
A
V
G
d
e
t
c
e
r
r
o
C

9
f
o
n
o
i
t
u
b

i
r
t
s
i

d

6

64

79

121

991

119

1 375

n
o
d
e
s
a
b
A
V
G
d
e
t
c
e
r
r
o
C

0
1
f
o
n
o
i
t
u
b

i
r
t
s
i

d

7

62

99

132

927

154

1 375

s
e
e
y
o
l
p
m
e
f
o
.
p
m
o
C

8

Given
data

25

30

50

500

40

645

A
V
G

4

Given
data

1 375

1 375

Regions

Retail shops

Retail shops

Retail shops

Production unit /  
head office

Retail shops

National

1

2

3

4

5

f
o
d
e
k
r
o
w
s
r
u
o
h

s
e
e
y
o
l
p
m
e

9

Given
data

2.6

3.2

4.9

40

4.8

s
e
e
y
o
l
p
m
e
f
o
r
e
b
m
u
N

10

r
u
o
h
r
e
p
n
o
i
t
a
s
n
e
p
m
o
C

s
e
e
y
o
l
p
m
e
f
o
d
e
k
r
o
w

12

k
c
o
t
s
l
a
t
i

p
a
C

11

Given
data

Given
data

12=8/9

2.8

4.5

6

42

7

0

0

0

1 500

0

1 500

9.6

9.4

10.2

12.5

8.3

11.6

55.5

62.3

64

Manual on regional accounts methods  

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Applying the principles for the regional allocation of GVA in current prices to particular industries

5

Table  3  shows  the  resulting  regional  GVA  if  we  apply  the 
regional distribution of compensation of employees, or the 
hours worked by employees, or the number of employees. 

The  results  of  Table  3  differ  considerably  from  those  in 
Table  1,  because  consumption  of  fixed  capital  is  allocated 
implicitly  to  all  regions  when  using  employment  data.  In 
our example, however, we did not assume any relationship 
between the activity of the retail shops and the consump-
tion  of  fixed  capital  by  the  wireless  network  of  antennas. 
Besides that, there are differences between the results from 
the  different  indicators  because  of  regional  differences  in 
part-time work and average wages paid. However, the use of 
employment indicators in this example might be classified 
as a B-method (see par. 3.9.1). 

It  must  be  stressed  that  the  previous  judgement  depends 
entirely  on  the  organisational  structure  of  the  enterprise. 
If,  for  instance,  the  enterprise  has  ancillary  units  that  are 
responsible for their part of the maintenance of the mobile 
phone network, a method is required whereby in addition 
to compensation of employees, consumption of fixed capital 
and net operating surplus (so GOS) also have to be imputed 
for  each  region.  In  such  a  case,  the  number  of  employees 
could be an acceptable indicator if it is related to the density 
and  use  of  the  mobile  phone  network  and  there  are  no 
regional  wage  differences  or  different  levels  of  part-time 
working. This would be a B-method. 

The treatment of a telecommunication company with fixed 
lines is similar in principle to the treatment of the mobile 
phone network. 

1.  Financial  intermediation  services  directly  charged  by 
financial  intermediaries  to  their  clients  and  measured 
as the sum of fees and commissions charged. Financial 
intermediaries  can  charge  explicitly  for  the  interme-
diation services which they provide. The output of such 
services is valued on the basis of fees and commissions 
charged.

2.  Financial  intermediation  services  indirectly  charged 

and indirectly measured (FISIM, P.119): 

a.  Financial  intermediaries  provide  services  for  which 
they  do  not  explicitly  charge  fees  and  commissions. 
Instead they pay lower rates of interest to those who 
lend  them  money  and  they  charge  higher  rates  of 
interest to those who borrow money from them. 

b.  The output of ‘other financial institutions’ and ‘other 
financial intermediaries’, excluding insurance corpo-
rations and pension funds except investment funds, 
is  valued  on  the  basis  of  the  difference  between  the 
actual rates of interest payable and receivable and a 
‘reference’ rate of interest. 

c.  For  those  to  whom  the  intermediaries  lend  funds, 
both resident and non-resident, it is measured by the 
difference  between  the  effective  interest  charged  on 
loans and the amount that would be paid if a refer-
ence rate were used. 

d.  For  those  from  whom  the  intermediaries  borrow 
funds, both resident and non-resident, it is measured 
by  the  difference  between  the  interest  they  would 
receive if a reference rate were used and the effective 
interest they actually receive.

5.6. Financial and insurance activities 
(Section K)

Section  K  consists  of  the  following  activities  (see  NACE 
Rev. 2, 2 and 3-digit level):

64  Financial  service  activities,  except 

insurance  and 

pension funding

Financial  intermediation  services  are  also  provided  by 
the  central  bank.  However,  the  central  bank  must  not  be 
included in the calculation of FISIM; its output is measured 
as the sum of costs.

Financial  intermediation  except  insurance  and  pension 
funding in NACE Rev. 2 includes the following groups:

64.1   Monetary intermediation (central banking and other 

65  Insurance,  reinsurance  and  pension  funding,  except 

monetary intermediation)

compulsory social security

66  Activities auxiliary to financial services and insurance 

activities 

We  recommend  that  financial  intermediation  and  insur-
ance activities should be treated separately. 

5.6.1. Financial service activities, except 
insurance and pension funding

64.2  Activities of holding companies

64.3  Trusts, funds and similar financial entities

64.9   Other  financial  service  activities,  except  insurance 

and pension funding

An  income  approach  is  recommended  for  financial  inter-
mediation  activities.  A  pseudo-bottom-up  method  should 
be  used  if  enterprise  data  exist  (A-method),  otherwise  a 
top-down income method is necessary. 

Financial  intermediation  services  (excluding  insurance 
services and pension funding services) consist of (19):

1. 

 Compensation of employees should be allocated to the 
local units where the people are employed. This would 
be an A-method.

(19) See ESA 2010, chapters 3 and 14.

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Applying the principles for the regional allocation of GVA in current prices to particular industries

 For  central  banking  authorities  GOS  should  be  allo-
cated to local units in proportion to the compensation 
of employees. This would be a B-method. The method 
will be an A-method if the central bank is a uniregional 
enterprise.

2. 

2. 

3. 

4. 

 For other institutions GOS should be allocated to local 
units in proportion to the sum of loans and deposits. This 
would be an A-method. If the sum of loans and deposits 
is not available, the regional distribution of compensa-
tion of employees might be used instead. This would be 
a B-method. When the regional distribution of the total 
number  of  employees  is  used,  it  will  be  a  B-method  if 
the average wages and salaries and the share of part-time 
work in total employment for this industry are the same 
for each region. It will become a C-method when these 
conditions cannot be fulfilled.

 For financial intermediation directly charged by finan-
cial  intermediaries,  data  for  the  regional  allocation 
of  output  (based  on  fees  and  commissions  charged, 
non-FISIM)  are  generally  not  available.  The  allocation 
of  non-FISIM  on  the  basis  of  the  regional  distribution 
of  compensation  of  employees  would  be  classified  as 
a  B-method.  See  the  previous  point  for  the  use  of  the 
regional indicator ’total number of employees’.

5.6.2. Insurance, reinsurance and pension 
funding, except compulsory social security

Insurance,  reinsurance  and  pension  funding,  except 
compulsory  social  security  in  NACE  Rev.  2  includes  the 
following groups:

65.1   Insurance

65.2   Reinsurance

65.3   Pension funding

These industries cover those institutional units which carry 
out insurance as their main activity, i.e. they transform indi-
vidual  risks  into  collective  risks  by  constituting  technical 
insurance reserves. The local units are the offices carrying 
out  the  insurance  activities,  as  explained  above.  These 
offices may serve a large area or even the whole country. 

The  absence  of  regional  data  (inherent  in  the  way  these 
enterprises operate) means that bottom-up methods cannot 
be used for the regionalisation of GVA. One must therefore 
use a pseudo-bottom-up method or, failing that, a top-down 
method.

In view of the data usually available, the income approach 
is  appropriate  for  both  pseudo-bottom-up  and  top-down 
methods. 

1. 

 Compensation of employees should be allocated to the 
regions  where  the  local  units  are  situated.  This  is  an 
A-method when the regional distribution of compensa-
tion of employees is used. 

 GOS  should  be  allocated  to  regions  using  the  regional 
distribution  of  insurance  premiums.  This  would  be  an 
A-method if local units provide the insurance services. 
The regional distribution of compensation of employees 
might be used when this indicator is not available. This 
method would be a B-method. It might be expected that 
consumption of fixed capital is about the same for each 
local unit. It might further be assumed that the regional 
distribution  of  compensation  of  employees  is  a  good 
reflection of these activities. The regional distribution of 
the number of employees might be a suitable indicator 
if there are no regional differences in wage level and if 
the share of part-time work in total employment is about 
the same in each region. This would be a B-method as 
well. The method will become a C-method if the condi-
tions required for the B-method are not fulfilled and no 
corrections are madeto compensate for the differences.

5.7. The allocation of FISIM to user 
industries

Part of the output of bank services is net interest payments 
from production units, households and government to the 
banks.  It  has  been  included  in  the  output  of  banks.  The 
output of FISIM must therefore be allocated to user sectors/
industries. Only part of total FISIM is allocated to regions as 
intermediate consumption of industries. That part of total 
FISIM is provided by the national accounts. 

ESA  2010,  par.  13.40:  ‘The  allocation  of  intermediate 
consumption of FISIM by user industries to regions poses a 
problem, because estimates of stocks of loans and deposits 
of  the  user  industries  are  usually  not  available  by  region.’ 
However, if this information is available, this method will 
be considered an A-method.

Where  no  data  are  available  about  the  regional  distribu-
tion of the aggregate stock of loans and deposits, the alloca-
tion of FISIM to user industries is made with a second-best 
method: regional output or GVA by industry is used as the 
distribution  indicator.  This  method  will  be  considered  a 
B-method. 

5.8. Dwelling services of owner-occupiers

Regional  accounts  methods  are  often  related  to  national 
accounts methods. In the case of the estimation of dwelling 
services of owner-occupiers, it is obvious that there is a close 
relationship  between  the  regional  and  national  methods, 
because  regional  stratification  of  the  national  estimates  of 
these services is generally applied. 

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5

The choice of indicators for the extrapolation and interpola-
tion of the benchmark estimates of dwelling services is an 
important  factor  in  the  quality  of  the  resulting  estimates. 
This is true for the quality of both the current and constant 
price estimates, provided that the same basic data are used 
for both. Therefore it could be argued that when the same 
price  index  is  used  for  both  the  calculation  at  constant 
prices  and  the  current  price  estimates,  this  would  be  the 
most appropriate method.

The  method  will  be  an  A-method  when  the  stratifica-
tion  method  is  used  adequately.  The  method  will  become 
a  B-method  when  the  quality  of  the  dwellings  can  only 
be taken into account at a higher aggregated level, and the 
prices are considered to give an acceptable reflection of the 
regional prices. The method will become a C-method when 
the current prices do not reflect the current regional prices 
adequately or the quality has not been taken into account.

The  regional  estimate  of  intermediate  consumption  for 
owner-occupied dwellings might be based on maintenance 
data and service costs (for instance for flats or apartments) 
for these dwellings, if available. This would be an A-method. 
If  these  data  are  not  available,  one  may  base  the  estimate 
on  the  national  relationship  between  output  and  interme-
diate  consumption  of  rented  dwellings,  preferably  by  type 
and construction period of the dwellings. This would be a 
B-method.  It  will  be  a  C-method  when  the  regional  esti-
mate  of  intermediate  consumption  of  owner-occupied 
dwellings is based on the regional distribution of the output 
of dwelling services of owner-occupiers.

The  Handbook  on  price  and  volume  measures  in  national 
accounts (20) provides useful information about the estima-
tion of the output of dwelling services of owner-occupiers, 
which can also be used for the regional estimates of these 
services. 

The ‘Handbook’ states the following: 

‘The  output  of  dwelling  services  of  owner-occupiers  at 
current prices is in many countries estimated by linking 
the  actual  rents  paid  by  those  renting  similar  proper-
ties  in  the  rented  sector  to  those  of  owner-occupiers. 
This  allows  the  imputation  of  a  notional  rent  for  the 
service  owner-occupiers  receive  from  their  property. 
This calculation is usually only carried out for a bench-
mark year, as few countries have the necessary data to 
apply the method on an annual basis. The benchmark is 
then interpolated and extrapolated using indicators that 
reflect the change over time in the price of rent and the 
volume of dwellings.’

‘The  benchmark  estimate  makes  use  of  detailed  data 
on  the  housing  stock  broken  down  between  owner-
occupied and rented property and by attributes of these 
properties that influence the rent they can be expected to 
generate. Examples of these attributes are the floor area, 
number of rooms, location and the existence of facilities 
(bathrooms, heating etc.) of the dwellings.’ For regional 
purposes, the age of the building should be added to the 
attributes.

‘This  method  is  known  to  some  as  the  “stratification 
method”  because  it  is  based  on  the  stratification  of 
dwelling attributes and rent. This is the approach agreed 
by EU Member States for the satisfactory estimation of 
the output of dwelling services and set down in Commis-
sion  Decision  95/309/EC.  The  approach  can  be  seen 
simply as the use of price and quantity data, at a detailed 
level, for the estimation of output for a particular year.’

Estimates  for  years  other  than  a  benchmark  year  are 
produced by projecting forward the housing stock and rents, 
using indicators that reflect the development of these vari-
ables over time. The indicators are chosen to reflect the three 
separate components of change: change in price, change in 
the quantity of the stock, and change in the quality of the 
stock.

The  stratification  method  contains,  in  its  calculation  of 
estimates  at  current  prices,  all  the  data  necessary  for  the 
decomposition  of  the  value  of  output  into  its  price  and 
volume  components.  The  use  of  this  same  price,  quantity 
and  quality  information  to  produce  estimates  at  constant 
prices  ensures  consistency  between  the  final  results  at 
current and constant prices.

(20) Handbook on price and volume measures in national accounts, European Communities, 

2001, page 99–100.

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67

The compilation of regional GVA in 
prices of the previous year; volume 
development of GVA 

6

6.  The compilation 

of regional GVA in 

prices of the previous 

year; volume 

development of GVA

6

The compilation of regional GVA in prices of the previous year; volume development of GVA 

6.1. Introduction

According  to  the  Handbook  on  price  and  volume  meas-
ures  in  national  accounts  price  and  volume  measurement 
is  related  to  the  decomposition  of  transaction  values  in 
current prices into their price and volume components. ‘In 
principle,  the  price  components  should  include  changes 
arising  solely  from  price  changes,  while  all  other  changes 
(relating  to  quantity,  quality  and  composition  changes) 
should be included in the volume components’. This is also 
referred  to  as  measurement  in  prices  of  the  previous  year, 
implying  the  analysis  of  economic  transactions  valued  at 
certain fixed prices. 

Generally  speaking,  regional  GVA  estimates  in  current 
prices are mainly based on the production method, without 
decomposition  for  products,  or  are  based  on  the  income 
method (see par. 3.2.1). No country compiles regional GDP 
based  on  the  expenditure  method  (see  par.  1.2.2),  so  the 
expenditure approach cannot be used for the compilation of 
regional GDP in prices of the previous year.

The compilation of regional GVA in prices of the previous 
year  assumes  the  existence  of  regional  prices,  which 
however are unavailable in the majority of the EU Member 
States (21). In some countries, regional prices exist only for 
specific industries.

Thus the guidelines of the Handbook on price and volume 
measures  in  national  accounts  cannot  be  applied  fully 
because  of  the  distinctive  features  of  the  compilation  of 
regional  GVA  in  current  prices  (generally  the  absence 
of  information  about  produced  goods  and  services),  and 
because of the absence of regional prices in the majority of 
the EU Member States. 

This chapter devotes attention to the criteria for the compi-
lation of national GVA in prices of the previous year from 
which the criteria to compile regional GVA in prices of the 
previous year are adapted. It then looks in more detail at the 
compilation of GVA in prices of the previous year for some 
particular industries.

6.2. The three principles provided by the 
‘Handbook’ (22)

level  of  aggregation,  shall  be  at  least  as  detailed  as  the 
P64 level of ESA 2010, for output as well as all categories 
of (intermediate and final) use.’

‘The  measurement  of  prices  and  volumes  should  start 
from a detailed breakdown of products for the different 
transaction  categories.  For  each  product  distinguished 
for  each  transaction  category,  a  price  index  should  be 
found with which the current value can be deflated, or a 
volume indicator should be found to extrapolate a base 
year value.’

This first principle has to be adapted for the compilation of 
regional GVA in prices of the previous year.

The  main  reason  is  that  the  compilation  of  regional  GVA 
generally cannot be directly based on product information, 
but  on  the  aggregates  output  and  intermediate  consump-
tion  or  on  the  income  components.  This  implies  that  the 
compilation of regional GVA of an industry in prices of the 
previous year, according to the production method, needs 
to  be  based  on  the  deflation  of  regional  output  and  inter-
mediate  consumption  of  this  industry,  assuming  an  equal 
composition of goods and services produced and consumed 
for this industry for all regions. 

To get a more homogeneous composition of goods produced 
and  consumed,  it  is  desirable  to  base  the  compilation  of 
GVA in prices of the previous year on the highest attainable 
level  of  disaggregation  of  industries.  The  same  arguments 
are valid when using the components of GVA according to 
the income method, where we have to assume that the qual-
ities  of  labour  and  fixed  capital  of  an  industry  are  evenly 
distributed across the regions.

With regard to current practices of regional GVA compila-
tion in current prices, a level of goods and/or industry detail 
at P*64 or A*64 is not attainable as a general guideline for 
the regional GVA compilation in prices of the previous year. 
In  line  with  the  basic  rule  of  par.  3.9.1  the  guideline  is  to 
compile regional GVA in prices of the previous year at least 
at  A*38  of  ESA  2010.  However,  because  of  the  aforemen-
tioned reasons, it is recommended to compile regional GVA 
in prices of the previous year at a greater detail than A*38, 
if possible.

6.2.1. The elementary level of aggregation

6.2.2. The choice of index formula and base year

The  first  principle  for  price  and  volume  measurement  in 
the national accounts as provided in the ‘Handbook’ is the 
following: 

‘In  the  measurement  of  prices  and  volumes  a  detailed 
level of aggregation of products shall be used. This level 
of  aggregation,  which  is  referred  to  as  the  elementary 

(21) See ESA 2010, par. 13.46–13.48.
(22) See footnote 13.

The second principle relates to the choice of index formula 
to be used for the purpose of deflation. This issue is related 
to  the  choice  of  the  base  year,  which  is  dealt  with  by  the 
third principle. 

The  volume  measures  available  at  the  elementary  level 
of  aggregation  should  be  aggregated  using  the  Laspeyres 
formula to obtain the volume measures of regional accounts 
aggregates. Price measures available at the elementary level 
of  aggregation  should  be  aggregated  using  the  Paasche 

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The compilation of regional GVA in prices of the previous year; volume development of GVA  6

formula  to  obtain  price  measures  of  all  regional  accounts 
aggregates. 

possible  measures  is  required,  and  the  other  can  be 
derived as a residual.’

The third principle regards volume measures derived at the 
elementary  level  of  aggregation  that  are  aggregated  using 
weights derived from the previous year, which becomes the 
base year. 

For  the  purpose  of  the  compilation  of  regional  GVA  in 
prices of the previous year, a fourth principle will be added: 
regional GVA per industry in prices of the previous year has 
to add up to the corresponding national total in prices of the 
previous year.

6.2.3. Regional GVA time series in prices of a 
reference year

For the compilation of regional GVA time series one should 
make a distinction between a base year and a reference year:

1.  The  base  year  is  the  year  whose  current  price  values 
are used to weight the volume measures derived at the 
elementary level of aggregation. In this case the weights 
of the previous year.

2.  The reference year is the year which is used for the pres-
entation of a time series of constant price data. In a series 
of index numbers, it is the year that takes the value 100.

According to the third principle of par. 6.2.2, the base year 
changes each year. Time series in prices of a reference year 
can be compiled by ‘chain-linking’ the year-to-year changes. 
It is important that a change of the reference year does not 
affect the year-to-year indices. One should be aware of the 
non-additivity  problem  in  time  series  of  ‘chained’  values. 
To  keep  all  year-to-year  growth  rates  of  each  variable 
unchanged when the reference year is changed, one should 
re-reference  each  variable  separately,  be  it  an  elemen-
tary  index,  a  sub-total  or  an  overall  aggregate  such  as  the 
regional GVA of all industries. These discrepancies should 
remain in the published data without adjustment. See par. 
2.2.3.,  ‘The  non-additivity  problem’  of  the  Handbook  on 
price and volume measures in national accounts. 

6.3. Criteria for appropriate regional price 
and volume indicators

6.3.1. National criteria

The  ‘Handbook’  discusses  appropriate  price  and  volume 
indicators for national accounts purposes. 

‘There  is  duality  in  the  measurement  of  prices  and 
volumes: one can either deflate a current year value with 
a  price  index,  or  alternatively  extrapolate  a  base  year 
value  with  a  volume  index  to  arrive  at  an  estimate  in 
prices  of  the  base  year.  Therefore,  only  one  of  the  two 

‘The two alternative approaches are in practice however not 
entirely equivalent. Deflation with a price index is generally 
preferred. There are two reasons for this:

1. 

2. 

 A sample of price observations is normally more repre-
sentative than an equally sized sample of quantity obser-
vations. In an open market there cannot be large differ-
ences in the changes of the prices charged for the same 
product  by  different  producers.  There  can  however  be 
significant  differences  in  the  changes  of  the  quantities 
of  that  product  produced  by  different  companies.  This 
makes  it  necessary  to  have  larger  samples  for  quantity 
indicators than for price indicators. In fact, for quantity 
indicators  one  would  prefer  to  have  nearly  exhaustive 
observation of all transactions.

 Price  index  compilation  is  usually  based  on  the  fixed-
basket  methodology:  the  prices  of  a  fixed  basket  of 
precisely  specified  goods  and  services  are  compared 
between  two  periods.  In  this  way,  the  quality  of  the 
goods and services compared is held constant, and the 
price index measures pure price changes. If a quantity or 
volume index is compiled directly, there is no guarantee 
that the units counted in one year are of the same quality 
as in the next year, unless one has very detailed quantity 
information  dealing  with  homogeneous  products.  It  is 
therefore  more  difficult  to  control  for  quality  changes 
when volume indicators are used.’

‘For each approach there is a variety of different indicators 
that can be chosen. To assess the appropriateness of an indi-
cator the following general criteria at the national level can 
be used:

1.  The completeness of the coverage of the product heading 
by  the  indicator.  For  example  whether  the  indicator 
covers  all  of  the  products  under  the  heading  or  just  a 
selection  of  them,  such  as  only  those  products  sold  to 
households.

2.  T he  valuation  basis  of  the  indicator.  For  e.g.  market 
output,  this  should  be  basic  prices,  rather  than,  for 
example, purchasers’ prices or input costs, whilst for e.g. 
final consumption expenditure it should be purchasers’ 
prices.

3.  The indicator should take quality changes into account, 
recording them within the volume estimates (see par. 2.4 
of the ‘Handbook’).

4. 

 The  conceptual  consistency  between  the  indicator  and 
the national accounts concepts.’ 

Based  on  these  criteria,  the  following  methods  for  the 
compilation of national GVA in prices of the previous year 
are generally applied:

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The compilation of regional GVA in prices of the previous year; volume development of GVA 

1. 

2. 

 Production  approach  for  market  activities:  national 
price 
information  should  be  available  for  output 
(producer  price  indices;  basic  prices)  and  for  interme-
diate consumption (consumer price indices; purchasers’ 
prices).  This  information  enables  the  compilation  of 
GVA  in  prices  of  the  previous  year  by  applying  the 
method  of  double  deflation.  The  ‘Handbook’  advises 
against  the  use  of  quantity  indicators  because  of  the 
quality issue. Quantity development might be used if the 
output regards homogeneous products. 

 Income  approach:  this  approach  is  mainly  used  for 
non-market  activities.  The  components  of  the  income 
method are (see par. 3.2.1): compensation of employees; 
consumption of fixed capital; other taxes less subsidies 
on production; and net operating surplus. In the case of 
non-market activities the net operating surplus is zero. 
Direct national prices are not available for deflating net 
operating surplus. However, implicit national deflators 
might  become  available  as  a  result  of  the  compilation 
of  the  production  approach,  or  Supply  and  Use  tables 
in  prices  of  the  previous  year.  The  main  compilation 
methods for national volume development are:

Compensation of employees:

—  Extrapolation  method:  direct  measurement  of  the 
quantity of labour, broken down by type of employees.

—  Deflation  method:  this  method  should  be  based  on 
actual cash wages per hour and broken down in sufficient 
detail to provide a deflator for groups of staff of homoge-
neous skill (see the Handbook on price and volume meas-
ures in national accounts par. 3.10.2 for more details).

Consumption of fixed capital: 

—  By  use  of  the  Perpetual  Inventory  Method  (see  par. 

3.2.1). 

—  Or deflation by suitable price indices.

Other taxes less subsidies on production:

—  Volume development is mainly based on quantity indi-
cators such as the total number of employees for payroll 
taxes, use of assets, turnover in case of taxes related to 
pollution  etc.  (see  the  ‘Handbook’  par.  3.10.1  for  more 
details).

6.3.2. Regional criteria for appropriate price and 
volume indicators

The availability of regional information for the compilation 
of regional GVA in prices of the previous year is generally 
limited. Regional price data for the application of the defla-
tion method are rarely available. This implies that generally 
national price indices, as a proxy for regional price indices, 
have to be used for deflating regional GVA. Regional quan-
tity  indicators  for  the  application  of  the  extrapolation 
method are generally limited, for instance the development 

of  employment  (number  of  employees  or  hours  worked), 
total number of passengers arrived and departed etc.

The  implication  is  that  some  criteria  of  the  Handbook  on 
price and volume measures in national accounts have to be 
adapted for regional purposes, while the aim remains to be 
as close as possible to the national criteria of the ‘Handbook’.

The regional criteria are:

1. 

2. 

3. 

4. 

5. 

6. 

 The  index  formula  and  the  base  year  are  the  same  for 
both the national and regional GVA estimates in prices 
of  the  previous  year.  Consequently,  one  has  to  use  the 
Paasche formula for the price index and the Laspeyres 
formula  for  the  volume  index.  The  weights  for  volume 
development are based on the previous year. 

 The level of compilation of regional GVA in prices of the 
previous  year  is  at  least  based  at  the  industry  detail  of 
A*38 of NACE Rev. 2. Because of the desired homoge-
neity of the activities per industry in terms of produced 
goods  and  services,  it  is  recommended  to  base  the 
compilation  of  regional  GVA  in  prices  of  the  previous 
year  at  the  greatest  possible  detail  of  industries.  This 
available detail of compilation may differ by country.

 Regional  price  indices  regarding  market  activities,  if 
available  and  measured  according  to  the  guidelines  of 
the ‘Handbook’, are preferred to national price indices 
for deflating the components of regional GVA at current 
prices.  However,  national  price  indices  can  be  a  good 
proxy for regional price indices when goods and services 
are expected to be produced for the national or interna-
tional markets.

 Deflation  of  the  components  of  regional  GVA  by  a 
national price index is preferred to the method of extrap-
olating the GVA components of the previous year by a 
regional quantity indicator. However, if there is evidence 
that the national price index is not a good indicator of 
the regional price development, it is acceptable to apply 
the extrapolation method.

 When  the  production  approach  has  been  used  for 
the  compilation  of  GVA  in  current  prices,  it  is  prefer-
able  to  apply  the  method  of  double  deflation  instead 
of  directly  deflating  the  regional  GVA  of  an  industry. 
The  main  reason  for  this  recommendation  is  that  the 
production  process  of  a  particular  industry  may  differ 
between  regions,  resulting  in  a  different  implicit  price 
and volume development for the GVA of this industry in 
different regions. 

 When  the  income  approach  has  been  used  for  the 
compilation  of  GVA  in  current  prices,  as  is  the  case 
for  non-market  activities  with  reference  to  collective 
services, it is recommended to base the estimate of GVA 
in prices of the previous year on a regional (if available) 
or national price deflator with regard to the components 
of  regional  GVA  (see  par  6.2.1).  Alternatively  one  may 

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apply the extrapolation of the components of GVA of the 
previous year by suitable quantity indicators, provided 
that  changes  in  the  quality  or  the  composition  of  the 
components  are  minor.  With  reference  to  individual 
services,  according  to  the  ‘Handbook’,  it  is  recom-
mended, if possible, to use a direct volume measurement 
of regional output.

7. 

 The  regional  GVA  estimates  in  prices  of  the  previous 
year have to add up to the corresponding national esti-
mates.

A  remark  has  to  be  made  about  the  use  of  national  price 
indices for deflating regional GVA. It might be expected that 
regional prices of a homogeneous product develop at about 
the same pace in different regions in an open and competi-
tive economy (see for instance par. 2.3 of the Handbook on 
price and volume measures in national accounts). However, 
there  are  exceptions  in  cases  where  regional  markets  are 
more or less closed, such as the regional housing markets. 
Non-market activities, such as general government, are by 
definition not competitive and in these activities no prices 
exist for their output. 

It should also be noted that there are industries in an open 
economy  that  are  competitive,  but  which  might  be  very 
heterogeneous,  as  is  the  case  for  the  agriculture  industry. 
The  price  development  of  different  agricultural  products 
or  services  might  behave  completely  differently.  This  is 
important when the composition of the output of agricul-
ture (which could consist of the products of cattle breeding, 
sheep  farming,  arable  farming,  viniculture,  horticulture, 
supporting  activities  etc.)  differs  by  region,  especially 
when  the  agriculture  industry  is  an  important  part  of  the 
economy for a region.

The  implication  is  that  for  industries  with  market  activi-
ties national price development might be a good proxy for 
regional price development in the absence of regional price 
indices,  if  sufficient  detail  of  industries  or  products  has 
been used. For agriculture, it is recommended to apply the 
method of double deflation at a very detailed industry level 
or even at a product level. 

The  use  of  the  deflation  method  or  extrapolation  method 
for non-market activities depends on institutional circum-
stances,  which  can  differ  by  country  and  by  region.  For 
instance, it might be the case that the wage negotiations for 
central  government  are  centralised  whereas  for  state  and 
local  governments  they  are  decentralised,  resulting  in  a 
different wage development per region. Therefore the insti-
tutional circumstances have to be taken into account when 
a choice has to be made between the use of national defla-
tors and regional volume development of, for instance, the 
number of or hours worked by government employees.

6.4. A, B and C-methods for the 
compilation of regional GVA in prices of 
the previous year

Based on the criteria of par. 6.3, we can distinguish an A, 
B  and  C-classification  of  the  methods  to  compile  regional 
GVA in prices of the previous year (see par. 3.9.1 for a clari-
fication of the A, B and C-methods).

The  following  combinations  of  regional  criteria  are  classi-
fied as A-methods:

I.  The combination of criteria 1, 2, 3, 5, 6 and 7 has been 

fulfilled.

—  Re criterion 1: the correct formula has been used.

—  Re  criterion  2:  the  industrial  detail  used  is  close  to 
A*64 or for some industries at A*88 or even 4-digit 
level of NACE Rev. 2.

—  Re  criterion  3:  the  regional  price  indices  used  at 
or  close  to  A*64  are  a  good  reflection  of  the  goods 
and services produced in the regions. For instance, 
regional  price  indices  for  agricultural  products 
and  real  estate  activities  (rents  and  imputed  rents 
of  owner-occupied  dwellings)  have  been  taken  into 
account.

—  Re  criterion  5:  the  method  of  double  deflation  has 
been  used.  Direct  deflation  of  regional  GVA  in 
current  prices  is  an  A-method  if  the  production 
process  of  an  industry  is  close  to  identical  for  each 
region.

—  Re criterion 6: regional price indices are available for 
deflation  of  compensation  of  employees.  Deflation 
of GOS per industry and region has been based on 
the corresponding national implicit deflator. When 
using the extrapolation method, the condition is that 
quality  changes  of  the  regional  volume  indicators 
need to be minor from one year to another.

—  Re criterion 7: regional GVA of the regions in prices 
of  the  previous  year  add  up  to  the  corresponding 
national GVA. 

II.  The combination of criteria 1, 2, 4, 5, 6 and 7 has been 

fulfilled.

—  Re criteria 1, 2, 5 and 7: see the remarks above (for 

combination I).

—  Re criterion 4: the national price indices used at or 
close  to  A*64,  or  for  some  industries  A*88  or  even 
beyond,  are  considered  a  good  proxy  for  regional 
price indices, and separate regional price indices for 
agricultural products and real estate activities (rents 
and  imputed  rents  of  owner-occupied  dwellings) 
have been taken into account.

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—  Re criterion 6: national price indices are available for 
deflation  of  compensation  of  employees.  Deflation 
of GOS per industry and region has been based on 
the corresponding national implicit deflator. When 
using the extrapolation method, the condition is that 
quality  changes  of  the  regional  volume  indicators, 
such as employment, need to be minor from one year 
to another.

6.5. Applying the criteria for the 
compilation of regional GVA in prices 
of the previous year to some particular 
industries

6.5.1. Introduction

The  following  combinations  of  regional  criteria  are  classi-
fied as B-methods:

III. The combination of criteria 1, 2 (A*38 of NACE Rev. 2), 

3, 5, 6 and 7. 

For various reasons it is relevant to provide further explana-
tion for some particular industries. This section covers the 
following industries:

NACE Rev. 2 

Description

—  Re criteria 1, 5, 6 and 7: see the remarks above (for 

combination I).

—  Re criterion 2: the industrial detail used is A*38.

—  Re  criterion  3:  whether  the  regional  price  indices 
at  A*38  are  a  good  reflection  of  the  goods  and 
services produced in the regions cannot be assessed. 
However, if the regional price indices are expected to 
be a good reflection, the method might be regarded 
as an A-method. 

IV. The combination of criteria 1, 2, 4, 5, 6 and 7.

—  Re criteria 1, 5, 6 and 7: see the remarks above (for 

combination II).

—  Re criterion 2: the industrial detail used is A*38.

—  Re  criterion  4:  whether  the  national  price  indices 
at  A*38  are  a  good  proxy  for  regional  price  indices 
cannot be assessed fully. However, the method might 
be considered as an A-method if the national price 
indices  are  expected  to  be  a  good  reflection  of  the 
regional  price  indices  and  separate  regional  price 
indices  have  been  made  for  agricultural  products 
and real estate activities (rents and imputed rents of 
owner-occupied dwellings).

Methods  for  the  compilation  of  regional  GVA  in  prices 
of  the  previous  year  are  C-methods  if  one  or  more  of  the 
criteria  of  the  B-methods  regarding  the  production  or 
income approach are not fulfilled.

01–03 

41–43 

45–47 

55–56 

Agriculture, forestry and fishing (Section A)

Construction (Section F)

Wholesale and retail trade; repair of motor 
vehicles and motorcycles (Section G)

Accommodation and food service activities 
(Section I)

64–66 

Financial and insurance activities (Section K)

68 

84 

85 

86 

Real estate activities (Section L); 
of which, imputed rent of owner-occupied 
dwellings

Public administration and defence;  
compulsory social security (Section O)

Education (Section P)

Human health activities (part of Section Q)

‘Agriculture,  forestry  and  fishing’  is  a  very  heterogeneous 
industry,  for  which  greater  detail  in  produced  goods  and 
services  is  relevant  for  a  proper  compilation  of  regional 
GVA  in  prices  of  the  previous  year.  The  construction 
industry operates in both national and local (more or less 
closed) markets with possibly different regional price devel-
opment. Financial and insurance activities will be discussed 
because of the complex nature of this industry. Imputed rent 
of  owner-occupied  dwellings  receives  attention  because  of 
its importance and the possibility of different price develop-
ment of the rents in different regions. The non-market activ-
ities also receive attention because of the complex nature of 
these activities.

For  industries  which  are  based  on  the  SBS,  the  criteria  of 
par 6.3 and 6.4 for the compilation of GVA in prices of the 
previous  year  can  be  applied  without  further  explanation. 
The  Handbook  on  price  and  volume  measures  in  national 
accounts  provides  some  supplementary  guidance  for  the 
industries which are not mentioned, for instance for ‘Water 
supply;  sewerage,  waste  management  and  remediation 
activities’ (divisions 36–39), ‘Telecommunications’ (division 
61), ‘Social work activities’ (divisions 87–88) and ‘Activities 
of households’ (divisions 97–98). 

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6.5.2. Agriculture, forestry and fishing 
(Section  A)

Agriculture  is  a  heterogeneous  industry.  Even  at  A*64 
of  NACE  Rev.  2,  division  01  includes  crop  and  animal 
production,  hunting  and  related  service  activities;  divi-
sion  02  concerns  forestry  and  logging,  and  division  03 
covers  fishing  and  aquaculture.  The  main  feature  is  that 
these  activities  are  generally  not  evenly  distributed  over 
the  regions,  while  the  prices  of  the  crop  products,  animal 
products,  fishing  products  etc.  might  develop  completely 
differently. Therefore, one might conclude that the regional 
production  of  this  industry  is  very  diverse.  Consequently, 
there is no single composite price index that can be used for 
deflating regional GVA of agriculture (division 01 of NACE 
Rev. 2) for all regions. 

For this reason, it is recommended to compile regional GVA 
of  Section  A  in  current  prices  in  a  much  greater  detail  of 
industries (4-digit level), which is close to the different prod-
ucts produced. The ‘Farm Structure Survey (FSS)’(23), which 
is carried out every 2 to 3 years, provides the data needed. 

See  par.  6.4  for  the  A,  B-classification.  If  the  deflation  or 
extrapolation has been based on the 2 or 3-digit level, the 
method  becomes  a  C-method. This  is  an  exception  to  the 
general  classification  rules,  because  it  might  be  assumed 
that the FSS and available prices for agricultural products 
will enable the compilation in prices of the previous year at 
the 4-digit level. When these data cannot be made available 
at 4-digit level, a 2 or 3-digit level compilation will become 
a  B-method,  if  the  different  activities  of  the  agriculture 
industry at the 2 or 3-digit level in a region have a similar 
composition to the activities at the national level, or if the 
contribution of agriculture to the total regional GVA of all 
industries is minor. 

6.5.3. Construction (Section F)

The ‘Handbook’ discusses (24) some key aspects of construc-
tion  work.  ‘Construction  output  covers  a  wide  range  of 
products including one-dwelling and multi-dwelling build-
ings, industrial and commercial buildings, highways, rail-
ways, and other major civil engineering projects. The output 
covers  new  construction,  major  improvement  of  existing 
structures and regular repair and maintenance. In addition 
to  this  broad  coverage,  other  features  of  the  constructing 
sector require close attention in measuring output at both 
current prices and prices of the previous year.’

The  ‘Handbook’  draws  the  conclusion  that  ‘whichever 
method  selected  will  have  to  satisfy  the  basic  criteria 

(23) The FSS is based on two regulations: Regulation 1166/2008 of 19 November 2008 

on farm structure surveys and the survey on agricultural production methods and 
repealing Council Regulation 571/88 and Regulation 1200/2009 of 30 November 
2009 implementing Regulation 1166/2008 on farm structure surveys on agricultural 
production methods, as regards livestock unit coefficients and the definitions of the 
characteristics.

(24) Handbook on price and volume measures in national accounts, par. 4.5, and page 74.

— be consistent with National Accounts concepts; using the 
appropriate “basic” price basis; provide full coverage of the 
activities  under  the  classification  heading  (both  function-
ally  and  geographically);  treat  quality  changes  as  volume 
changes; use actual rather than artificial prices; and ensure 
that all measures are appropriate to the time period.’

The  ‘Handbook’  considers  the  use  of  input  prices  as  a 
C-method. To get an A-method, the ‘Handbook’ discusses 
the following methods for estimating output prices:

—  The ‘actual prices’ method; this approach is considered 

resource intensive.

—  The  ‘model  pricing’  method  (for  instance  for  a  one-
family  dwelling);  such  an  approach  is  also  resource 
intensive at the regional level.

—  The  ‘hedonic’  method;  it  is  unlikely  that  this  method 

will be generally applicable. 

The  main  conclusion  is  that,  while  it  is  already  difficult  to 
compile national deflators according to the guidelines of the 
‘Handbook’, it will become even more difficult to apply these 
guidelines for the compilation of regional deflators. This leads 
to the following guidelines for the compilation of regional GVA 
of the construction industry in prices of the previous year. 

Because of the wide variety of activities under the heading 
of ‘construction’, for deflation purposes it is strongly recom-
mended  to  base  the  compilation  in  prices  of  the  previous 
year at least at the following 2-digit level:

41   Construction of buildings
42   Civil engineering
43   Specialised construction activities

It might be expected that it will be extremely difficult to compile 
regional price indices, and the extrapolation method cannot be 
used because of the great variety of production processes. 

Both phenomena lead to the use of national deflators at the 
2-digit level of the construction industry.

See par. 6.4 for the A, B-classification. If the deflation has been 
based on the section level, the method becomes a C-method. 

6.5.4. Wholesale and retail trade; repair of motor 
vehicles and motorcycles (Section G)

The focus in this paragraph is on wholesale and retail trade, 
where  output  will  be  measured  in  margins.  The  trade 
margin  is  the  difference  between  the  sales  price  and  the 
purchase price of a good that is being traded (see ESA 2010, 
par.  3.56  for  a  more  precise  definition).  The  trade  margin 
can be seen as the price the buyer pays for the trade service 
although there is no direct transaction. 

The ‘Handbook’ states the following about the volume of output 
of services: ‘In principle an analysis should be made of the actual 
services  provided  by  the  trader  to  the  customer.  Generally 
speaking, the service provided is to make available various goods 

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at location and time convenient for the customer. There are many 
aspects consumers (implicitly or explicitly) consider in deciding 
in which shop their purchases will be made. These include the 
price level, the quality of the products and the quality of the trade 
service provided.’ The latter regards: the range of products on 
sale, the accessibility of the shop, and the general service level of 
the staff. ‘Different forms of trade provide different services and 
these services change continuously over time.’

The ‘Handbook’ provides a method in which quality change 
can  be  taken  into  account.  To  achieve  an  A-method  at  the 
national  level  requires  an  approach  that  accounts  for  the 
difference between deflated sales and deflated purchases (see 
‘Handbook’,  par.  4.6.1).  However,  this  method  is  still  in  an 
experimental phase. ‘As a B-method can be used the assump-
tion that the volume of margins follows the volume of sales, 
or – equivalently – that the margin-to-sales ratios are constant 
in constant prices.’ The B-method is generally applied at the 
national level. Any other methods, in particular the deflation of 
margin output directly by a sales price index, are C-methods. 
The ‘Handbook’ makes clear that for the application of the A- 
and B-method  (regional) sales prices are a necessary condi-
tion for the compilation of regional output margins in prices 
of the previous year. These regional sales prices, however, are 
not available in most of the EU Member States. 

Therefore  it  is  recommended  to  apply  the  implicit  price 
indices at the 2-digit level of NACE Rev. 2 as compiled in 
the national accounts for deflating the output margins of the 
previous year. This is considered a B-method.

6.5.5. Accommodation and food service 
activities (Section I)

‘This section includes the provision of short-stay accommo-
dation for visitors and other travellers and the provision of 
complete meals and drinks fit for immediate consumption. 
The  amount  and  type  of  supplementary  services  provided 
within this section can vary widely.’ (NACE Rev. 2, Statis-
tical  classification  of  economic  activities  in  the  European 
Community, pages 243-246).

Section I comprises:

55   Accommodation

55.1   Hotels and similar accommodation

55.2  Holiday and other short stay accommodation

55.3   Camping  grounds,  recreational  vehicle  parks  and 

trailer parks

55.9   Other accommodation

56   Food and beverage service activities

56.1   Restaurants and mobile food service activities 

56.2   Event catering and other food service activities

56.3   Beverage serving activities

The  Handbook  on  price  and  volume  measures  in  national 
accounts  (page  82)  considers  ‘three  major  issues  to  be 
considered when compiling data for these services:

1. 

2. 

3. 

 Quality  —  The  wide  coverage  of  this  product  heading 
means  that  very  different  qualities  of  products  are 
included — youth hostels and five star hotels, take-away 
kebab stalls and Michelin-rated restaurants. Proper price 
and volume measurement would imply that the greatest 
possible  product  detail  is  obtained  in  the  data,  so  that 
separate prices and values are collected, and any aggre-
gate data are constructed using appropriately weighted 
subsets. For example, in hotel services, separate collec-
tion of data for different ratings of hotels enhances the 
measurement of price and volume movements.

 Group bookings and discounts — One common feature 
of  the  hotel  trade  is  that  there  can  be  considerable 
discounts  available  for  block  bookings,  for  example 
when a tour operator purchases a block of rooms for a 
season. Changes in these discounts should be viewed as 
a price effect and recorded in the price index.

 Household  and  Business  consumption  —  Whilst  the 
product  consumed  is  unlikely  to  differ  for  household 
and  business  consumption  (business  people  and  private 
persons can stay in the same hotels and eat in the same 
restaurants),  it  is  possible  that  the  weighting  structure 
will be rather different, with private persons consuming a 
greater proportion of the cheaper products. Of course, the 
discounting of rooms for tour operators could mean that 
some private persons can afford higher quality rooms than 
they would be able to afford at the regular hotel price.’

Besides  these  national  issues  one  needs  to  consider  some 
regional issues.

1.  The  nature  of  these  activities  might  differ  between 
metropolitan,  urban  and  rural  areas,  and  for  touristic 
regions.

2.  Price  development  of  the  activities  at  the  3-digit  level 
might  be  different  for  the  different  regions  due  to  the 
popularity of certain regions. 

One  might  draw  the  conclusion  that  the  compilation  of 
GVA  in  prices  of  the  previous  year  is  preferred  to  be  at 
the 3-digit level of Section I and, if possible, regional price 
indices are preferred. This would be an A-method when the 
other  criteria,  described  in  par.  6.4,  methods  I  or  II,  have 
also been applied. It would be a B-method when the criteria 
in par. 6.4, methods III or IV have been applied. It would 
become  a  C-method  if  one  or  more  of  the  criteria  of  the 
B-methods  regarding  the  production  or  income  approach 
are not fulfilled.

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6.5.6. Financial and insurance activities 
(Section K)

6.5.6.1. Financial intermediation services

The  ‘Handbook’  states  the  following  about  the  output  of 
financial  intermediation  services:  ‘The  output  of  financial 
intermediation services consists of two main components: 
financial intermediation services directly charged by finan-
cial intermediaries to their clients and FISIM, the English 
acronym  for  “financial  intermediation  services  indirectly 
measured”. As far as volume measurement and deflation are 
concerned, FISIM causes some major conceptual and prac-
tical  problems.  This  is  related  to  the  way  FISIM  has  been 
defined and has to be calculated.’

FISIM

The compilation of financial intermediation services and espe-
cially FISIM suffer from both conceptual and practical prob-
lems when compiling output in prices of the previous year. 

The generally applied national method for the compilation 
of  FISIM  in  prices  of  the  previous  year  is  the  following: 
base period interest margins on loans and deposits, applied 
to  the  stock  of  loans  and  deposits,  will  be  re-valued  to 
base  period  prices,  as  described  in  the  FISIM  Regula-
tion. The revaluation is generally based on a general price 
index such as the implicit price deflator for domestic final 
demand. The ‘Handbook’ concludes: ‘The ideal deflator for 
this  purpose  would  measure  the  actual  change  in  price  of 
money.  However,  this  is  not  possible  in  practice,  so  defla-
tion by a general price index is seen to be the best approxi-
mation  that  can  be  found,  as  this  measures  the  change  in 
purchasing  power  of  money.  Examples  of  a  general  price 
index that can be considered an acceptable measure of the 
purchasing power of money are, in order of suitability: the 
GDP deflator, the deflator of domestic final demand and the 
overall CPI’. The ‘Handbook’ considers these methods, used 
at the national level, as B-methods. 

The regionalisation of FISIM in prices of the previous year 
faces the same problems as for the corresponding national 
estimate. Because the financial activities generally operate at 
the national level, it is entirely acceptable to use the national 
deflator  for  deflating  regional  FISIM.  This  is  a  B-method, 
which is in line with national accounts practice.

Financial intermediation outside FISIM

Apart  from  FISIM,  the  output  of  financial  intermedia-
tion services consists of selling products for which fees or 
commissions  are  charged  directly  to  the  customers,  for 
example:

—  A charge for the provision of a credit card or a handling 
fee associated directly with a financial transaction.

—  The fee for the management of an investment fund.

—  The charge for conversion of one currency into another 

currency.

The data required at regional level are generally unavailable. 
It is, for the same reasons as for FISIM, acceptable to use the 
national deflator. This would be an A-method.

If no separate information is available for both FISIM and 
financial  information  outside  FISIM,  and  the  national 
deflator  for  this  industry  is  used,  this  would  become  a 
B-method.

6.5.6.2. Insurance and pension funding services

Output of insurance and pension funding services is meas-
ured as (see ESA 2010, par. 16.51 and par. 16.52):

—  Total premiums earned

—  plus total premium supplements

—  minus adjusted claims incurred

—  minus benefits due

—  minus  increases  (plus  decreases)  in  technical  reserves 

and with-profits insurance.

The  ‘Handbook’  (Par.  4.9.2,  page  95)  states  that  ‘from  a 
purely theoretical viewpoint it seems impossible to imple-
ment a concept of deflating the service output on the basis of 
output statistics. The main reason is that there is no directly 
observable  price  or  quantity  that  is  truly  representative 
of  the  output.  An  A-method  is  therefore  considered  not 
possible.’ 

This  industry  generally  operates  at  a  national  level,  which 
implies that the national implicit deflators may be used for 
deflating the output of insurance activities. This would be 
considered a B-method, which is in line with the national 
classification.

6.5.7. Real estate activities (Section L); of which, 
imputed rent of owner-occupied dwellings

See par. 5.8 for the proper method to compile the output of 
imputed rent of owner-occupied dwellings in current prices. 

The  compilation  method  for  imputed  rent  of  owner-occu-
pied dwellings in prices of the previous year is considered 
to  be  an  A-method  if  based  on  the  stratification  method, 
and  appropriate  regional  volume  indices  for  extrapolation 
or appropriate regional price indices for deflation have been 
used. 

If the stratification method is not used then regional price 
indices or regional volume indicators need to be constructed. 
Quality change of the dwellings is an important factor that 
needs to be reflected in any method to ensure that they are 
correctly  recorded  as  part  of  the  volume  change  and  not 
as changes in price. In constructing price indices, it is also 
important  to  ensure  that  they  adequately  reflect  what  is 

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being measured by the output of owner-occupied dwelling 
services. The concept of dwelling services for owner-occu-
pied rents is that these should be related to the actual rents 
that  could  be  expected  from  the  dwelling.  Such  a  rent  is 
more likely to be comparable with that from private rented 
dwellings than that from all rented dwellings or only those 
from the public rented sector, which may include an element 
of social housing. This is because of the possible existence 
of  pricing  differentials  between  public  and  private  rented 
dwellings, from subsidies, rent controls or other factors. 

The  method  will  be  an  A-method  when  the  stratification 
method  is  used  in  regional  prices  of  the  previous  year. 
The method becomes a B-method when the quality of the 
dwellings can only be taken into account at a higher aggre-
gated level and the prices are considered to give an accept-
able reflection of the regional prices. The method becomes 
a  C-method  when  the  prices  of  the  previous  year  do  not 
reflect the regional prices adequately or the quality has not 
been taken into account.

6.5.8. Public administration and defence; 
compulsory social security (Section O)

The general rule in national accounts is that output methods 
are  preferred  for  all  individual  services.  For  collective 
services  the  only  possible  method  is  the  input  method, 
which in national accounts is classified as a B-method. See 
ESA  2010,  par.  3.104–3.106  for  a  definition  of  individual 
and collective services. 

With regard to the output method for individual services, 
the  approach  to  be  followed  is  ‘to  determine  the  universe 
of  producing  government  units  (ministries,  institutions, 
agencies, local authorities, etc.). For a representative sample 
of  producers,  one  or  several  outputs  should  be  defined  in 
co-operation  with  those  producers.  The  changes  of  these 
outputs should then be weighted by the sum of the costs of 
each producer.’ 

‘The problem of measuring prices and volumes for non-
market output arises from the fact that by definition no 
market prices exist. For that reason, the value of output 
at current prices is defined as the sum of costs. Without 
prices  for  the  output,  there  are  only  two  options  for 
constant  price  measurement:  deflating  inputs  and 
direct volume measurement. 

Current  practice  for  constant  prices  is  mostly  based  on 
deflating  inputs.  This  implies  an  assumption  that  the 
change  in  the  volume  of  inputs  is  representative  for  the 
change in the volume of output. However, it is not certain 
that  more  or  better  inputs  lead  automatically  to  more  or 
better  output.  Using  this  assumption  makes  it  impossible 
to analyse changes in productivity, and will wrongly esti-
mate the true output change if this differs from the change 
in inputs.

Volume indicators can relate to:

 — Inputs, for example the number of employees.

This  would  simply  assume  that  twice  as  large  a  public 
service would mean twice as much output, irrespective 
of  how  those  additional  personnel  were  deployed.  The 
advantage of the method is the ease of implementation, 
and the ready availability of data. This method however 
ignores all changes in productivity due to e.g. improved 
equipment (for example increased use of PCs) or more 
efficient procedures.

—  Output, the preferred approach.

It  is  not  always  easy  to  define  exactly  what  the  unit  of 
output  is.  For  individual  goods  and  services  it  is  in 
principle  possible  to  define  the  output,  since  an  actual 
delivery  of  that  output  takes  place  from  the  producer 
to the consumer(s) (cf ESA95, par. 3.82a). For example, 
for  education,  the  output  is  the  amount  of  teaching 
consumed by a pupil. For hospital services, the output is 
the amount of care received by a patient.’ (See Handbook 
on price and volume measures in national accounts, par. 
3.1.2.1)

It is probable that the national approach for the estimation 
of regional GVA in prices of the previous year is unattain-
able. For instance, it might be expected that the information 
needed to follow the national approach of the volume meas-
urement  for  individual  services  provided  by  the  different 
production units is not available at the regional level. 

The implication is that the main approach for the estimation 
of regional  GVA in prices of the previous year for general 
government  and  social  security  is  based  on  the  following 
approaches:

1. 

2. 

 A  distinction  should  be  made  between  the  different 
government  sub-sectors  (central  government,  state 
government,  other  local  authorities,  and  compulsory 
social security). The main reason for this distinction is 
that the price indices for compensation of employees can 
be different for the different government sub-sectors and 
can therefore differ by region.

 Regional  volume  development  of  GVA  is  based  on  the 
elements  of  the  income  approach  for  both  collective 
and  individual  services:  compensation  of  employees, 
consumption of fixed capital, and other taxes on produc-
tion.  Net  operating  surplus  is  zero  for  non-market 
services. Compensation of employees generally has the 
largest share in GVA. It is assumed that the capital stock 
of the government sub-sectors is related to the number 
of government employees, though there may be excep-
tions  for  civilian  infrastructure,  such  as  dykes,  roads, 
tunnels, bridges and military infrastructure. If possible, 
this should be taken into account.

3.  The regional indicators for the estimation of the regional 
volume development of GVA of general government are 
generally limited to: 

78

Manual on regional accounts methods  

The compilation of regional GVA in prices of the previous year; volume development of GVA  6

a.  The  regional  development  of  the  number  of  hours 

worked by government employees; or

b.  Implicit  national  price  indices,  taken  from  the 

payments  by  patients  (with  or  without  reimbursement  by 
third parties) or through direct financing by government or 
corporations. The services regard at the 3 and 4-digit level:

national accounts estimates.

86.1   Hospital activities

This approach will become a B-method when the elements 
1  and  2  have  been  taken  into  account  and  the  estimate  of 
the  regional  volume  development  of  GVA  has  been  based 
on element 3a. The regional allocation of national GVA in 
prices of the previous year of general government based on 
the regional distribution of corresponding GVA in current 
prices  is  a  C-method.  The  latter  method  is  equivalent  to 
deflating  regional  GVA  in  current  prices  by  the  implicit 
national  price  index.  This  is  also  a  C-method.  However, 
the  use  of  implicit  national  price  indices  might  become  a 
B-method  when  one  can  assume  that  the  regional  price 
indices  for  compensation  of  government  employees  and 
consumption of fixed capital change at the same pace as the 
corresponding national price indices.

6.5.9. Education (Section P)

For measuring education services in prices of the previous 
year  it  is  necessary  to  make  a  distinction  between  non-
market services and market services. 

For the market education services applies the general rule, 
which means that regional GVA of these services should be 
deflated by appropriate prices. This would be an A-method. 
When  national  price  indices  taken  from  the  national 
accounts compilation are used, this will be a B-method. An 
input-based method will be a C-method. 

Since output prices are not available for non-market educa-
tion  services,  the  only  A-method  for  these  services  is  to 
use the regional development of ‘pupil hours’ to extrapolate 
the  current  price  regional  output  from  the  previous  year, 
provided that the compilation is based on a stratification of 
types of education (primary, secondary and higher educa-
tion) by region. The method becomes a B-method when this 
stratification is not applied and the extrapolation is based on 
the regional development of the total number of pupils and/
or students. The method will also be a B-method, when the 
corresponding  implicit  national  deflator  has  been  applied. 
Any  input-based  method  is  a  C-method,  for  instance  the 
use of numbers of ‘teacher hours’. 

6.5.10. Human health activities (Division 86, part 
of Section Q) (25)

Human health services can be organised in many different 
ways. They are by definition provided for individuals and can 
be delivered as market or non-market output. The providers 
include government, non-profit institutions and non-finan-
cial  corporations.  The  services  may  be  funded  through 

(25) See the Handbook and price and volume measures in national accounts, par. 4.13.

86.2   Medical and dental practice activities

86.21   General medical practice activities 

86.22   Specialist medical practice activities 

86.23   Dental practice activities 

86.9   Other human health activities

The ‘Handbook’ states that ‘currently, almost all countries 
measure the volume of health output as the sum of deflated 
costs. It is an easy method because data on costs are usually 
readily  available.  However,  such  input  methods  do  not 
allow the productivity of the health sector to be analysed.’ 
The ‘Handbook’ therefore makes a strong case for adopting 
output methods but recommends a detailed level of compi-
lation,  which  cannot  be  reached  for  the  regional  human 
health  activities  without  imposing  an  excessive  response 
burden. 

Consequently,  it  seems  impossible  to  apply  the  output 
method for the compilation of the output of human health 
activities  in  prices  of  the  previous  year.  One  might  also 
expect that regional prices for the human health output will 
only be available in rare cases. 

Therefore it is recommended to follow the generally applied 
approach  of  measuring  the  volume  of  health  as  the  sum 
of  deflated  costs,  using  the  national  implicit  price  indices 
compiled  by  the  national  accounts.  This  would  be  an 
A-method if applied at the 4-digit level of the human health 
activities, and a B-method if applied at the 3 or 2-digit level. 
It would become a C-method if the A or B-method cannot 
be  applied.  The  main  reason  for  this  classification  is  that 
implicit  national  price  development  might  differ  between 
the various categories of human health services. However, if 
the implicit price development has a similar rate of growth 
for the different human health services, the 2-digit level of 
these activities might be considered a B-method. 

6.6. Volume growth rates of regional GVA

Volume development is derived as regional GVA of period 
(t) in prices of the previous year divided by regional GVA of 
period  (t−1)  in  current  prices,  multiplied  by  one  hundred, 
minus one hundred.

Revisions  to  volume  development  are  mainly  caused  by 
revised  data  in  the  national  accounts  in  current  prices 
and changes in the regional distribution in current prices, 
because  prices  of  products  or  compensation  of  employees 
are almost never revised. 

  Manual on regional accounts methods

79

General principles for allocating  
Gross Fixed Capital Formation (GFCF)  
to regions

7

7.  General principles for 

allocating Gross Fixed Capital 

Formation (GFCF) to regions

7 General principles for allocating  Gross Fixed Capital Formation (GFCF)  to regions

7.1. Introduction

7.4. Choice of methods 

Gross Fixed Capital Formation (GFCF; P.51g) is part of gross 
capital  formation  (P.5).  The  latter  (P.5)  consists  of  GFCF 
(P.51g),  changes  in  inventories  (P.52)  and  acquisitions  less 
disposals  of  valuables  (P.53).  This  manual  only  deals  with 
GFCF (P.51g) (see Annex 1b for the classification of transac-
tions in products).

According  to  ESA  2010,  3.124  ‘GFCF  consists  of  resi-
dent  producers’  acquisitions,  less  disposals,  of  fixed  assets 
during a given period plus certain additions to the value of 
non-produced  assets  realised  by  the  productive  activity  of 
producer  or  institutional  units.  Fixed  assets  are  produced 
assets used in production for more than one year.’

7.2. Allocation principle 

Acquisitions  in  the  GFCF  context  can  be  interpreted  in 
different  ways,  and  the  choice  is  a  crucial  one  for  GFCF. 
Production units can ‘acquire’ assets to use in the produc-
tion process without actually owing them. The assets might 
be legally owned by another part of the same enterprise, or 
by other enterprises. 

For example, a subsidiary property company might own all 
the buildings for an enterprise group; a builder might hire 
construction equipment from a specialist leasing company 
on  a  long  term  contract;  and  many  enterprises  acquire 
assets in a tax-efficient way on a financial lease from a bank 
or credit institution. Users and owners of assets can clearly 
have  different  industrial  classifications  and  also  different 
regional locations. 

According to ESA 2010, 13.33, ‘GFCF is allocated to regions 
by ownership. 

1.  Fixed  assets  owned  by  a  multiregional  unit  are  allo-

cated to the local KAUs where they are used. 

2.  Fixed  assets  used  under  an  operational  lease  are 
recorded  in  the  region  of  the  owner  of  the  assets,  and 
those  used  under  a  financial lease  are  recorded  in  the 
region of the user.’

7.3. Sales of existing assets 

Production  units  sell  existing  assets  to  each  other,  e.g. 
second-hand machinery. When assets move between indus-
tries and regions, the total price paid should be included in 
the GFCF in one industry or region and the price received 
should  be  deducted  from  GFCF  in  the  other  industry  or 
region. 

Transaction  costs,  such  as  legal  fees  on  sales  of  land  and 
existing buildings, are counted as additional GFCF.

A top-down approach is generally unsuitable for GFCF as it 
is particularly difficult to find appropriate indicators. GFCF 
is by nature highly volatile, and more stable indicators such 
as wages and salaries are not particularly appropriate. 

In  summary,  regional  data  for  GFCF  should  preferably  be 
based on comprehensive surveys, for which NUTS 2 level is 
one of the strata, or on administrative data. Indicators such 
as employment data should not be the major source of GFCF 
estimates  for  any  industry  and  should  only  be  used  to  fill 
gaps.

7.5. Preferred methods 

The compilation of regional GFCF by industry should pref-
erably  be  based  on  an  investment  survey  and  administra-
tive data with a regional dimension of at least NUTS 2 level, 
and the national accounts GFCF table by industry (NACE 
Rev. 2) and by type of asset (CPA 2008) or by institutional 
sectors. 

One may distinguish two main approaches. The first regards 
an approach in which regional GFCF data about the types 
of asset are available. This method will be discussed in par. 
7.5.1. The second approach is based on regional GFCF data 
for institutional sectors and will be discussed in par. 7.5.2. 
The chosen approach depends entirely upon the data avail-
able.

7.5.1. The industry by type of asset approach

This approach assumes that the national accounts provide 
the necessary data on national GFCF by industry and type 
of asset, and that the regional distribution of the fixed assets 
can be based on an investment survey or on administrative 
data.  The  compilation  will  be  explained  by  three  related 
tables. A national table (Table 1) provides the starting point. 
A  table  of  GFCF  for  each  industry  (A*10)  by  type  of  asset 
and regions at NUTS 2 level will be compiled; Table 2 serves 
as an example. In Table 3, GFCF by industry and region is 
derived.

The national accounts (Table 1) provide information about 
investment by industries (the rows) according to the owner 
principle.  The  columns  provide  information  about  the 
invested assets by industry.

Explanation of the data in Table 1:

The capital letters refer to the types of asset. The subscripts 
refer to the industries. For instance, the variable E1 is the 
investment  of  the  agriculture  industry  in  other  vehicles, 
such as tractors etc. The SUM(A1:A11) is the investment of all 
industries in dwellings. The SUM(A1:N1) is the total invest-
ment in all assets by the agriculture industry. 

82

Manual on regional accounts methods  

General principles for allocating  Gross Fixed Capital Formation (GFCF)  to regions 7

The  information  on  sales  of  existing  assets  is  in  principle 
only available at the national level for the total of industries 
(see par. 3.2.2 for the classification of assets). 

The  estimate  of  regional  GFCF  by  industry  should  prefer-
ably be based on an intermediate step, by compiling tables 
of GFCF by region (NUTS 2) and type of asset for each sepa-
rate industry A to U (A*10) and manufacturing (industry C) 
(see Table 2). 

The data in Table 2 refer as an example to the industry 
‘Agriculture, forestry and fishing’:

For  instance,  the  variable  E11  is  the  investment  in  other 
vehicles  by  the  agriculture  industry  in  region  1.  The 
SUM(A11:N11)  is  the  total  investment  by  the  agriculture 
industry in region 1. The sum E1 is the sum of the invest-
ment  in  other  vehicles  by  the  agriculture  industry  in  all 
regions. This sum must be equal to E1 in the national table. 
The SUM(A1:N1) is the aggregated sum of total investment 
by the agriculture industry and must be equal to the corre-
sponding investment in the national accounts. 

The advantages of this approach are twofold: 

1.  The  aggregated  regional  data  per  type  of  asset  can  be 

checked against the national accounts data. 

2.  There might be alternative indicators available for some 

types of asset, for example:

—  Dwellings → building permits.

—  Passenger cars → automobile organisations.

—  Computers  →  related  to  the  number  of  employed 

persons. 

The data in Table 3 are a summary of the results of the tables 
per industry (Table 2 for each industry) by type of asset and 
region.

  Manual on regional accounts methods

83

7

General principles for allocating  Gross Fixed Capital Formation (GFCF)  to regions

Gross fixed capital formation

6
1

)
1

N

:
1
A
(
M
U
S
=

)
2

N

:
2
A
(
M
U
S
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)
3

N

:
3
A
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M
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4

N

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4
A
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5

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5
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6

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7

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A
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M
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8

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8
A
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9

N

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A
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Sales of existing fixed assets

5
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N
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4
1

1

N

2

N

3

N

4

N

5

N

6

N

7

N

8

N

9

N

0
1

N

Transfer costs of ground

3
1

1

M

-

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-

-

-

-

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Cultivated assets

2
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1
L

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1
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0
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2

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84

Manual on regional accounts methods  

1
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T

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
General principles for allocating  Gross Fixed Capital Formation (GFCF)  to regions 7

formation
capital 
Gross fixed 

6
1

fixed assets
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computers
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cars
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  Manual on regional accounts methods

85

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7

General principles for allocating  Gross Fixed Capital Formation (GFCF)  to regions

l
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l
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T

Manual on regional accounts methods  

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
General principles for allocating  Gross Fixed Capital Formation (GFCF)  to regions 7

7.5.2. The industry by sectors approach

This approach assumes that the national accounts provide 
the  necessary  data  on  national  GFCF  by  industry  and  by 
institutional  sector.  The  compilation  will  be  explained  by 
three related tables. A national table (Table 4) provides the 
starting point. A table of GFCF for each industry (A*10) by 
sector and regions at NUTS 2 level will be compiled; Table 5 
serves as an example. Table 6 is a summary of the results in 
Table 5 for each industry.

In the industry by sectors approach, it is assumed that GFCF 
data (without information about types of asset) are available 
for  units  that  belong  to  an  institutional  sector.  Regarding 
multiregional  enterprises,  it  is  assumed  that  data  on  total 
GFCF are available for their local units, otherwise one needs 
appropriate indicators for the regional allocation of GFCF.

The national accounts (Table 4) provide information about 
the investment by industries according to the owner prin-
ciple.  The  columns  provide  information  about  GFCF  by 
sector.

Explanation of the data in Table 4:

The capital letters refer to sectors. The subscripts refer to 
the  industries.  For  instance,  the  variable  A1  is  the  invest-
ment of non-financial corporations in agriculture, forestry 
and fishing. The SUM(A1:A11) is total GFCF by non-finan-
cial corporations. The SUM(A1:I1) is the total investment by 
all sectors in the agriculture, forestry and fishing industry. 

The  estimate  of  regional  GFCF  by  industry  should  prefer-
ably be based on an intermediate step, by compiling tables 
of GFCF by region (NUTS 2) and sector for each separate 
industry A to U (A*10) and manufacturing (industry C) (see 
Table 5). 

The data in Table 5 refer as an example to the industry 
‘Agriculture, forestry and fishing’:

The  variable  A11  is  the  investment  in  region  1  by  the 
sector  non-financial  corporations  which  are  classified 
to  the  industry  agriculture,  forestry  and  fishing.  The 
SUM(A11:N11)  is  the  total  investment  by  the  agriculture 
industry  in region 1. The sumA1 is the sum of the invest-
ment of non-financial corporations, belonging to the agri-
culture  industry,  in  all  regions.  This  sum  must  be  equal 
to  A1  in  the  national  table.  The  SUM(A1:I1)  is  the  aggre-
gated  sum  of  total  investment  by  the  agriculture  industry 
and must be equal to the corresponding investment in the 
national accounts. 

The data in Table 6 are a summary of the results of the tables 
per industry (Table 5 for each industry) by sector and region.

  Manual on regional accounts methods

87

7

General principles for allocating  Gross Fixed Capital Formation (GFCF)  to regions

l
a
t
o
T

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90

Manual on regional accounts methods  

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
General principles for allocating  Gross Fixed Capital Formation (GFCF)  to regions 7

7.6. A, B, and C-methods for the 
compilation of regional GFCF

The  industry  by  type  of  asset  approach,  described  in  par. 
7.5.1,  can  be  classified  as  an  A-method  if  an  investment 
survey or administrative data based on the owner principle 
underpin the estimates. 

Where the regional allocation of national GFCF in Table 1 
cannot be based on an investment survey or administrative 
data,  the  allocation  of  the  types  of  asset  based  on  related 
regional indicators would be a B-method. For instance, the 
investment in:

 — Dwellings,  non-residential  buildings  and  civil  engi-
neering works might be based on appropriate indicators, 
such as building permits and professional journals.

 — Means  of  transport  might  be  based  on  registrations 
(passenger  cars)  and  professional 
journals  (ships, 
aircraft),  or  activity  indicators,  such  as  the  number  of 
passengers arrived and departed.

 — Machinery  and  equipment  might  be  based  on  profes-

sional journals.

 — It  might  be  expected  that  the  replacement  rate  of 
computers is high (about every four to five years). One 
might therefore assume that investment in computers is 
related to the number of employed persons. 

The  industry  by  sectors  approach,  described  in  par.  7.5.2, 
can be classified as an A-method if an investment survey or 
administrative data based on the owner principle underpin 
the estimates.

Where  the  regional  allocation  of  national  GFCF  in  Table 
4  cannot  be  based  on  administrative  data  or  an  invest-
ment  survey,  the  allocation  of  GFCF  by  industries  and 
sectors  based  on  appropriate  regional  indicators  would  be 
a  B-method.  For  instance,  the  investment  by  transport 
companies  may  be  based  on  the  regional  distribution  of 
jobs. It is assumed that the size of the workforce is related 
to the capital stock and that more or less stable replacement 
rates apply.

A  C-method  is  any  method  which  does  not  satisfy  the 
requirements of the A or B-methods noted above.

  Manual on regional accounts methods

91

allocation of GFCF by particular industries 8

Applying the principles for the regional 

8.  Applying 

the principles 

for the regional 

allocation of GFCF 

by particular 

industries

8

Applying the principles for the regional allocation of GFCF by particular industries

8.1. Introduction 

This  chapter  discusses  regional  GFCF  estimates  for  the 
industries  where  statisticians  have  encountered  specific 
difficulties with principles, methods and data. It illustrates 
the  practical  application  of  the  concepts  of  ESA  and  the 
general principles of chapters 2 and 3. All the principles of 
these chapters apply to these industries and are referred to 
rather than reiterated in this chapter.

Regional  tables  of  GFCF  by  industry  are  based  on  NACE 
Rev. 2 sections. Therefore GFCF by industry should be eval-
uated according to this standard classification.

The  following  industries,  which  correspond  to  sections  of 
NACE Rev. 2, need further consideration:

B  Mining and quarrying

D  Electricity, gas, steam and air conditioning supply

E  Water  supply;  sewerage,  waste  management  and  reme-

diation activities

F  Construction

H  Transportation and storage

J 

Information and communication

The main issues specific to these industries are as follows:

—  Mining and quarrying activity is usually located in the 
regional  territory  of  a  country.  However,  some  coun-
tries do have an element of production in the extra-regio 
territory. 

—  Activities  D,  E  and  J  are  all  affected  by  cross-border 
activities using a network of cables, pipelines or wireless 
networks. 

—  Construction may take place in a region different from 
the  fixed  establishment  of  the  producer  and  mobile 
equipment  might  be  leased.  The  mobile  equipment 
might also be used by several local units. 

—  Transportation  includes  an  element  of  networks  and 

mobile equipment. 

These  industries  will  be  discussed  in  more  detail  in  the 
following paragraphs.

8.2. Mining and quarrying (Section B), 
Electricity, gas, steam and air conditioning 
supply (Section D), and Water supply; 
sewerage, waste management and 
remediation activities (Section E)

Specific  to  these  industries  is  that,  besides  GFCF  in  fixed 
assets  such  as  buildings,  they  also  invest  in  networks  of 
pipelines,  cables  and  antennas,  mainly  in  regions,  but 
sometimes  in  the  extra-regio  territory. The  main  rule  (see 
par. 7.2) is that GFCF in networks has to be allocated to the 
local units responsible for their operation. 

8.2.1. Mining and quarrying (Section B)

—  GFCF in the  distribution  network should be separated 
from other GFCF. If the data for this do not exist for all 
enterprises, the missing data should be estimated using 
data for similar enterprises. This would be a B-method.

—  GFCF by an owner in a pipeline has to be allocated to 
the  local  units  that  operate  the  pipeline  (A-method). 
If  the  pipeline  crosses  regional  borders,  and  if  several 
local  units  of  the  same  enterprise  in  different  regions 
are  responsible  for  operating  the  pipeline,  one  can  use 
a  physical  indicator,  such  as  the  length  of  the  pipeline 
for which a local unit is responsible, to allocate GFCF to 
regions. This would be an A-method.

—  GFCF  by  an  owner  in  an  offshore  oil  platform  at  the 
continental shelf under the country’s sovereignty should 
be  allocated to  the extra-regio territory. This would be 
an A-method.

—  Any other method would be classified as a C-method.

8.2.2. Electricity, gas, steam and air conditioning 
supply (Section D) and Water supply; sewerage, 
waste management and remediation activities 
(Section E)

—  The treatment of GFCF by enterprises in Sections D and 

E is the same as for Section B.

8.3. Construction (Section F) 

A significant amount of equipment is leased in this industry. 
Equipment may also be owned centrally by the enterprise, 
but used by several local units. 

The principles adopted in chapters 2 and 3 require that GFCF 
owned by the enterprise is allocated to the region where the 
local unit using it is situated and that the leased (operational 
leasing) equipment is allocated to the region where the local 
unit owning it resides. 

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Applying the principles for the regional allocation of GFCF by particular industries 8

8.4.3. Telecommunications 

The  user  and  residence  principles  must  be  respected.  This 
means that GFCF in the entire telecommunications infra-
structure,  in  particular  the  (mobile)  telephone  network, 
must  be  allocated  to  the  local  units  that  manage  it.  This 
would be an A-method.

The use of regional indicators related to GFCF in telecom-
munications, for instance the number of employees in local 
units responsible for operating the network, would be clas-
sified as a B-method. 

Any other methods would be classified as C-methods.

The  main  problem  for  the  construction  industry  is  that 
mobile equipment will generally be used at the building site 
on a temporary basis, and buildings or construction work-
shops  on  a  fixed  basis  for  more  than  one  year.  Moreover, 
mobile equipment might be owned by the main contractor 
or  by  subcontractors.  Some  of  the  mobile  equipment  will 
be  used for a year or more and some for less  than a  year. 
Because  of  this,  it  is  generally  difficult  to  get  information 
that suits the need for a regional allocation of GFCF by the 
construction industry according to the ESA guidelines. 

A  practical  solution  for  all  cases  other  than  operational 
leasing would be to allocate GFCF to the region of residence 
of  the  local  unit  responsible  for  the  management  of  the 
equipment. This could be the residence of the headquarters 
or an ancillary unit of a multiregional building company, 
or  the  residence  of  a  uniregional  building  company  or 
sub-contractor.  This  would  be  an  A-method  if  empirical 
regional data are available and a B-method if no empirical 
regional data are available and GFCF is allocated to the resi-
dence of the headquarters. 

8.4. Transportation and storage 
(Section H) and Information and 
communication (Section J) 

8.4.1. Transport (excluding rail and air transport)

GFCF should be allocated to the production units that use 
the assets. For instance, investment in ships should be allo-
cated to the land base of the enterprise. 

8.4.2. Rail and air transport 

Data  for  local  units  should  be  used  if  available  and  a 
pseudo-bottom-up approach is recommended according to 
the residence principle. 

However for the following assets it is proposed:

a.  Rolling-stock  and  aircraft  can  be  allocated  using  an 
activity indicator, such as passenger arrival and depar-
ture numbers. This would be a B-method.

b.  Infrastructure, such as railway tracks and signal boxes, 
should  be  allocated  to  the  local  units  that  support  it. 
If there are no data on local units, the strict territorial 
criterion  can  be  applied  to  allocate  infrastructure  to 
regions. In the latter case it is assumed that local units 
operate this infrastructure. The differences between one 
method  and  the  other  are  likely  to  be  negligible.  This 
would also be a B-method.

No extra-regio allocation is envisaged.

  Manual on regional accounts methods

95

General principles for regional labour data 
by industry

9

9.  General principles for 

regional labour data by 

industry

9

General principles for regional labour data by industry

9.1. Introduction

In  recent  decades  the  statistical  observation  of  the  labour 
market regarding persons, the administrations of enterprises 
and  central  registrations  has  been  expanded  regularly. (26) 
Outside  the  Convergence  Regions,  the  Regional  Competi-
tiveness  and  Employment  objective  aims  to  strengthen 
competitiveness and attractiveness, as well as employment. 
Besides  that,  labour  is  important  for  regional  accounts 
compilation,  because  employment  (number  of  employees 
or hours worked) or compensation of employees are often 
used  as  regional  indicators  for  the  allocation  of  GVA  to 
regions. Because there are many definitions of employment 
and compensation of employees, we explain in more detail 
the different concepts that may be used, and especially the 
information necessary for national and regional accounts. 

9.1.1. Labour Force Survey (LFS)

The  EU  Labour  Force  Survey  (LFS)  is  a  large  household 
sample survey providing quarterly results on labour partic-
ipation  of  people  aged  15  and  over,  as  well  as  on  persons 
outside  the  labour  force.  All  definitions  apply  to  persons 
aged 15 years and over living in private households. Persons 
carrying  out  obligatory  military  or  community  service 
and  persons  in  institutions/collective  households  are  not 
included  in  the  target  group  of  the  survey.  This  survey 
provides compulsory data at NUTS 2 level on employment 
(jobs  and  hours  worked),  unemployment  and  economic 
inactivity. 

In the LFS employed persons are:

—  Aged  15  years  and  over  (16  and  over  in  Spain,  United 
Kingdom  and  Sweden  (1995–2001);  15–74  years  in 
Denmark,  Estonia,  Hungary,  Latvia,  Finland  and 
Sweden (from 2001 onwards).

—  Persons who performed work during the reference week, 
even for just one hour a week, for pay, profit or family 
gain. 

—  Persons who were not at work but had a job or business 
from which they were temporarily absent because of e.g. 
illness,  holidays,  industrial  dispute  or  education  and 
training.

The  variables  full-time/part-time  in  the  LFS  refer  to  the 
main job. The distinction between full-time and part-time 
work is based on a spontaneous response by the respondent 
except  in  the  Netherlands,  where  part-time  is  defined  as 
where the usual hours are fewer than 35 hours and full-time 
where the usual hours are 35 hours or more, and in Sweden 
where this criterion is applied to the self-employed. It is not 
possible  to  establish  a  more  precise  distinction  between 

(26) See the Eurostat internet site.

full-time and part-time employment, since working hours 
differ  between  Member  States  and  between  branches  of 
activity.

Usual hours worked are the modal value of the actual hours 
worked  per  week  over  a  long  reference  period,  excluding 
weeks  when  an  absence  from  work  occurs  (e.g.  holidays, 
leave and strikes).

Actual  hours  worked  in  the  reference  week  are  the  hours 
the  person  spent  in  work  activities  during  the  reference 
week.  Work  activities  should  include  production  activi-
ties,  ancillary  activities,  short  pauses,  and  education  and 
training  necessary  for  successfully  carrying  out  either  the 
production  or  ancillary  activities.  Actual  hours  worked 
should exclude travel time between the home and the place 
of work, the main meal breaks, absences from work within 
the working period for personal reasons, and education and 
training hours which are not necessary for carrying out the 
production or ancillary activities.

9.1.2. Structural Business Statistics (SBS)

SBS  cover  industry,  trade  and  services.  They  describe  the 
behaviour  (structure,  conduct  and  performance)  of  busi-
nesses across the European Union (EU); data are available 
for  the  EU-27  and  for  the  Member  States.  The  main  indi-
cators within SBS are generally collected and presented as 
monetary  values,  or  as  counts  (for  example,  numbers  of 
enterprises or persons employed). SBS may be used to answer 
questions such as how much wealth and how many jobs are 
created  in  an  activity.  For  regional  purposes,  compulsory 
data  at  NUTS  2  level  are  collected  on  an  annual  basis  for 
wages and salaries and employed persons.

9.1.3. Administrative data

Statistical  offices  might  complement  survey  data  with 
administrative data. Tax administrations are an important 
source of information about the employment of employees, 
providing data about VAT, labour costs (wage declarations), 
employed  persons,  income  tax  etc.  The  main  reason  for 
using  administrative  data  is  to  lower  the  response  burden 
on enterprises.

Another  advantage  might  be  the  availability  of  more 
comprehensive  data.  This  might  be  highly  relevant  for 
regional  accounts,  because  of  a  better  coverage  of  small 
enterprises. However, there are disadvantages too:

1. 

2. 

3. 

 For  multiregional  enterprises,  information  is  generally 
collected at the head office without breaking down the 
data to the level of the local units.

 The  administrative  concepts  do  not  always  match  the 
national accounts concepts.

 The  administrative  data  generally  underestimate  the 
data (for example VAT-receipts) because of tax evasion.

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Manual on regional accounts methods  

General principles for regional labour data by industry 9

Enterprises/KAUs

Persons

Work

Don’t work

Employed
persons

Labour force

Unemployed

Inactive

Workplace/ 
region

Workplace/ 
NUTS-2

Workplace/ 
NUTS-2

Place of 
living/NUTS-2

Activity

Activity

Hom

Activity

Activities

Employed 
persons; NUTS-2

Hours worked; 
national

Job

Job

Jobs

Hours worked

Hours worked

Hours worked

SBS

LFS

4. 

 Politicians  may  change  laws  which  impact  upon  the 
availability  or  comparability  of  the  data.  This  can  be 
difficult to resolve.

A social statistical database in which surveys and adminis-
trative data are combined and reconciled might provide the 
necessary consistency of the labour data (27). To conclude, 
administrative  data  is  potentially  a  very  important  source 
when combined and reconciled with other sources for both 
national and regional accounts.

An overview of the different labour concepts is shown in the 
employment diagram.

9.2. Employment

For a better understanding it is necessary to discuss briefly 
the relevant definitions as used in the national and regional 
accounts: 

(27) Veen, G. van der (2007), Integration of microdata from business surveys and the social 
statistics database. Paper DGINS September 2007 Budapest, Voorburg/Heerlen..

Employed persons

Employed persons are all individuals who work for a busi-
ness unit or private household for a remuneration and reside 
in a region or in the extra-regio territory of the country. 

Annual average of employed persons 

ESA  2010,  par.  11.04,  states:  ‘The  aggregates  to  which  the 
figures for population and labour inputs are related are often 
annual  totals.  In  this  case,  average  population  and  labour 
inputs during the year have to be used. When surveys are 
conducted at several times during the course of the year, the 
figure taken is the average of the results obtained on these 
various  dates.  When  a  survey  is  carried  out  over  a  period 
within the year, the period used is to be representative; the 
last available information on variations throughout the year 
is to be used in estimating data for the year as a whole. For 
example, when estimating average employment, allowance 
has to be made for the fact that certain people do not work 
throughout the whole year, for example casual workers and 
seasonal workers.’ (See also par. 4.5)

  Manual on regional accounts methods

99

9

General principles for regional labour data by industry

Employed persons may either be employees or  
self-employed 

9.3. Compensation of employees 

Employees  are  persons  who,  during  a  reference  period, 
performed some work for wage or salary, in cash or in kind, 
by agreement with an employer. Self-employed persons are 
those who earn their income by performing labour on their 
own account (company, profession) or who operate jointly 
with others in the business of their family.

Jobs

A  job  is  a  work  opportunity  occupied  by  an  employed 
person for a defined period or until further notice. Because 
employed persons may hold more than one job, the number 
of  jobs  will  therefore  equal  or  exceed  the  number  of 
employed persons.

Full-time and part-time jobs

A full-time job concerns a contractually agreed normal full 
day or week task. All other jobs are part-time jobs.

Hours of work

The labour input of employees is the total hours of work in 
the reference period. There are several concepts of working 
hours:

—  Contractual hours

Contractual  hours  are  agreed  in  the  contract  between 
employer and employee. Agreed paid annual leave and 
paid public holidays are not included in the contractual 
hours. 

—  Paid overtime

Time  worked  in  addition  to  normal  hours  of  work  for 
which  a premium rate  is paid.  Overtime  that  has  been 
given back and time spent travelling or waiting are not 
considered paid overtime.

—  Hours paid

Hours  paid  is  the  sum  of  contractual  hours  and  paid 
overtime. Time spent on sick leave or bad weather leave 
belong to hours paid. Contrary to the legal terms, paid 
annual leave and public holidays are not considered part 
of hours paid. 

—  Hours actually worked

Hours actually worked are hours paid plus unpaid over-
time  and  less  the  hours  paid  but  not  worked,  e.g.  sick-
ness absence, pregnancy leave, maternity leave, strikes, 
parental  leave,  short-term  absence,  and  additional 
free  time  for  older  people.  In  the  regional  accounts 
by  industry  there  is  a  focus  on  employed  persons  and 
employees, thus implicitly on self-employed persons.

Labour costs reflect the employers’ expenses directly related 
to  employees  in  the  production  process.  The  labour  costs 
concept contains two main components: wages and salaries, 
and employers’ social contributions.

Wages and salaries

The  most  important  form  of  wages  is  wages  in  cash 
(including  withheld  taxes  on  wages  and  contributions). 
Wages in cash includes regular gross wages, standard extra 
allowances (for instance for hazardous work), bonuses, over-
time pay, tips and compensation for costs related to employ-
ment  (for  instance  refunds  of  fares  to  and  from  work). 
Bonuses include holiday pay, cash or staff bonuses, gratui-
ties,  profit  shares  and  a  thirteenth  or  fourteenth  month. 
Wages in kind occur if an employee benefits from his or her 
job besides being paid wages. Examples of payment in kind 
are: the private use of a company car, free housing, free food, 
lower interest rates on mortgages, free or cheap use of the 
company’s products or services, and day nursery provision 
supplied or subsidised by the company.

Employers’  social  contributions  consist  of  legally  or 
contractually required payments to social security, such as 
pension  premiums.  As  set  out  by  ESA  2010,  par.  4.07,  pay 
over periods in which no work is done due to illness or bad 
weather is also regarded as a social contribution. 

9.4. Labour productivity

Economic growth in regional accounts terms is the volume 
growth of regional GDP, and this can be broken down into 
components  including  changes  in  labour  productivity,  the 
productivity per unit of labour, and changes in the volume 
of labour. The same breakdown can be made for the volume 
change of regional value added by industry. 

This simple approach provides a framework for monitoring 
and analysing regional economic growth by industry. More 
homogeneous  figures  on  labour  inputs,  obtained  by  using 
the  number  of  employed  along  with  hours  worked  and 
distinguishing  between  various  levels  of  educational  and 
vocational  qualifications  of  the  labour  force,  will  result  in 
more  detailed  labour  productivity  figures  (see  ESA  2010, 
par. 22.100). 

A main problem for regional accounts estimates of labour 
productivity  may  occur  when  employment  data  only  are 
used  to  measure  regional  GVA.  In  principle  there  will 
then  be  no  differences  in  regional  labour  productivity  per 
detailed industry. 

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Manual on regional accounts methods  

General principles for regional labour data by industry 9

9.5. Choice of methods 

The following conditions have to be fulfilled:

1. 

 The  regional  distribution  of  employment,  number  of 
employees, self-employed persons, full-time equivalents, 
hours  worked,  and  compensation  of  employees  should 
be based on the local units. This condition is significant 
for the available data sources: 

a.  For  multiregional  enterprises  in  SBS,  information 
might only be available for the number of employees 
and wages and salaries.

b.  SBS  are  not  obliged  to  provide  data  at  the  NUTS  3 

level (28).

c.  Wage  declarations  of  multiregional  enterprises 
intended  for  tax  authorities,  are  often  prepared  by 
the head office without splitting the data between the 
local units.

d.  If dependent on sources such as LFS, corrections are 
needed to provide data for the local production units 
instead of the place of residence of the respondents.

2. 

 The  observations  made  in  par.  3.9.1  also  apply  for  the 
regional  labour  data  by  industry.  However,  an  excep-
tion  will  be  made  for  the  industrial  detail  at  which 
hours worked is to be compiled. Because most sources 
do not provide a detailed industrial breakdown of hours 
worked, the industrial detail may be less than the A*38 
level  of  NACE  Rev.  2.  The  minimum  requirement  for 
hours worked is that it should be compiled at least at the 
A*10 level of NACE Rev. 2.

3. 

 Empirical data should be made available at the NUTS 3 
level for the number of employees and self-employed:

a.  The number of employees can be based on adminis-
trative data at NUTS 3 level and SBS for NUTS 2 level, 
or a combination of these sources.

b.  The number of self-employed persons might be based 
on a variety of sources, e.g. agricultural census, busi-
ness register, SBS, LFS, population census, adminis-
trative data (tax registration) etc.

c.  The definitive data must refer to the correct period of 

observation.

d.  The  regional  data  must  closely  match  the  corre-

sponding national accounts totals.

e.  If the definitive regional data are empirically based, 
refer  to  the  correct  period  of  observation,  and  are 
correctly  allocated  to  the  local  production  or  ancil-
lary  units,  the  method  might  be  classified  as  an 
A-method.

(28) Council Regulation (EC, Euratom) No 58/97 of 20 December 1996 concerning structural 

business statistics, Annex 1, section 7, article 3.

f.  If  the  provisional  data  are  based  on  the  regional 
distribution of the definitive regional data according 
to  the  A-method,  the  method  might  be  classified  as 
a  B-method,  provided  that  this  approach  has  been 
applied  at  least  at  the  level  of  industries  of  NACE 
Rev.  2  division,  A*38.  If  this  is  not  the  case,  this 
method will be classified as a C-method.

g.  If any of the conditions of c, d or e are not fulfilled, 

the method will be classified as a C-method.

4. 

 Empirical data should be available at the NUTS 2 level 
for the hours worked by employees and self-employed: 

a.  SBS partly collect data on hours worked, but only at 

enterprise level and not for local units.

b.  The  number  of  hours  worked  by  employees  and 
self-employed  (often)  need  to  be  based  on  the  LFS 
or administrative data, or on a combination of both 
sources. Adjustments may be required for the correct 
allocation  to  industry  or  local  unit  (e.g.  because  of 
commuting).

c.  The definitive data must refer to the correct period of 

observation.

d.  The  aggregated  regional  data  have  to  closely  match 

the corresponding national accounts totals. 

e.  If the definitive regional data are empirically based, 
refer  to  the  correct  period  of  observation,  and  are 
correctly  allocated  to  the  local  production  or  ancil-
lary  units,  the  method  might  be  classified  as  an 
A-method. 

f.  If  the  provisional  data  are  based  on  the  regional 
distribution of the definitive regional data according 
to  the  A-method,  this  approach  might  be  classified 
as  a  B-method,  provided  that  the  method  has  been 
applied  at  least  at  the  level  of  industries  of  NACE 
Rev.  2  division,  A*10.  If  this  is  not  the  case,  this 
method will be classified as a C-method.

g.  Regional GVA per hour worked at the industry level 
of at least NACE Rev. 2 division, A*10 and at NUTS 
2  must  show  plausible  results.  Large  variations  in 
regional  GVA  per  hour  worked  have  to  be  clarified. 
There might be problems with GVA or hours worked 
or both. 

h.  If any of the conditions of c, d, e or g are not fulfilled, 

the method will be classified as a C-method.

5. 

 Empirical data should be made available at the NUTS 3 
level for the compensation of employees:

a.  Compensation of employees at NUTS 3 level might be 

mainly based on administrative data. 

b.  The definitive data must refer to the correct period of 

observation.

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General principles for regional labour data by industry

c.  The  regional  data  must  closely  match  the  corre-

sponding national accounts totals.

d.  If the definitive regional data are empirically based, 
refer  to  the  correct  period  of  observation,  and  are 
correctly  allocated  to  the  local  production  or  ancil-
lary  units,  the  method  might  be  classified  as  an 
A-method.

e.  If  compensation  of  employees  at  NUTS  3  level  is 
based on the regional distribution of the number of 
employees within NUTS 2 and is done top-down at 
the industry level of NACE Rev. 2 division, A*38, this 
method might be classified as a B-method.

f.  If  the  provisional  data  are  based  on  the  regional 
distribution of the definitive regional data according 
to  the  A-method,  this  approach  might  be  classified 
as  a  B-method,  provided  that  the  method  has  been 
applied  at  least  at  the  level  of  industries  of  NACE 
Rev.  2  division,  A*38.  If  this  is  not  the  case,  this 
method will be classified as a C-method.

g.  The share of compensation in regional GVA at the 
industry level of at least NACE Rev. 2 division, A*38 
and NUTS 3 must show plausible results. Large vari-
ations in this share have to be clarified. 

h.  If any of the conditions of c, d, e or g are not fulfilled, 

the method will be classified as a C-method.

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General principles for allocating 
income transactions and aggregates of 
households to regions 

10

10.  General 

principles for 

allocating 

income 

transactions and 

aggregates of 

households to 

regions

10

General principles for allocating income transactions and aggregates of households to regions 

10.1. General overview of the household 
accounts 

ESA 2010, par. 13.51, states: ‘The regional household accounts 
are based on the households that are resident in a regional 
territory. The numbers of persons that are members of the 
resident households add up to the total resident population 
of the region.’ (29) The accounts are restricted to the distri-
bution and use of income accounts. According to ESA 2010 
(chapter  8  ‘Sequence  of  accounts’)  these  accounts  can  be 
subdivided into the ‘Allocation of primary income account 
(II.1.2)’,  the  ‘Secondary  distribution  of  income  account 
(II.2)’, the ‘Redistribution of income in kind account (II.3)’, 
the  ‘Use  of  disposable  income  account  (II.4.1)’,  and  the 
‘Use of adjusted disposable income account (II.4.2)’. These 
accounts are briefly discussed in paragraph 10.2. 

The  balancing  items  primary  and  (adjusted)  disposable 
income  can  be  gross  or  net.  Consumption  of  fixed  capital 
(P.51c) is the difference. It depends on the available sources 
whether the balancing items will be gross or net. Paragraph 
10.5 is devoted to consumption of fixed capital. 

10.2. Clarification of the accounts 

10.2.1. Allocation of primary income account 
(Table 24.6 Full sequence of accounts for 
households, account II.1.2 in ESA 2010) 

This  account  is  used  to  determine  the  primary  income  of 
households resident in the regional territory. ‘Net balance of 
primary incomes (B.5n)’ is the compensation of employees 
received (D.1) plus net operating surplus (B.2n) from their 
own-account production of housing services, plus net mixed 
income (B.3n) , plus property income (D.4) received by resi-
dent  households  minus  property  income  (D.4)  payable  by 
resident households. 

The net balance of primary incomes (B.5n) is an indicator of 
the capacity of households resident in a region to generate 
an  income  as  entrepreneurs,  employees  or  recipients  of 
property income, in the region of their residence, in other 
regions or abroad.

In  general,  the  primary  income  of  households  is  the  most 
important  of  the  primary  incomes  of  the  various  sectors. 
If the primary income of resident households per capita is 
lower in one region than in others, this might lead to income 
transfers  from  central  government  or  from  supra-national 
institutions  such  as  the  European  Union  to  the  poorer 
regions. A relatively low primary income of resident house-
holds might be an indicator of the dependency of that region 
on the support of national and supra-national institutions. 

(29) The extra-regio territory is not taken into account, because it is assumed that there is no 

population (see also par. 4.5: Regional GDP per capita and regional population).

A relatively low primary income of households might also 
lead to structural measures to improve the earning capacity 
of  the  region  concerned.  Creating  economic  activity  (and 
thus employment) is one of the most important remedies.

For purposes of regional policy, it is important to break down 
the primary income of households into its components: net 
operating surplus (B.2n), net mixed income (B.3n), property 
income (D.4), and compensation of employees (D.1). 

It is important to note that economic developments might 
have different effects on the various parts of primary income 
of households. For example, increasing competition in the 
agricultural  markets  directly  affects  the  mixed  income  of 
farmers, while it is highly probable that this is not the case 
for  employees. Thus,  if  there  are  substantial  differences  in 
the composition of the primary income of resident house-
holds  between  regions,  economic  policy  might  produce 
substantially  different  effects  on  the  levels  of  primary 
income between regions.

10.2.2. Secondary distribution of income 
account of households (Table 24.6 Full sequence 
of accounts for households, account II.2 in 
ESA 2010) 

The  secondary  distribution  of  income  account  of  house-
holds  records  transactions  which,  for  households  resident 
in  the  regional  territory,  constitute  a  redistribution  of 
income in cash. These transactions comprise social benefits 
and  contributions  (D.6),  current  taxes  on  income,  wealth 
etc.  (D.5)  and  other  current  transfers  (D.7),  such  as  net 
premiums (D.71), accident insurance claims (D.72), current 
international cooperation (D.74), and miscellaneous current 
transfers  (D.75),  such  as  current  transfers  between  house-
holds (D.752). 

When  these  transactions  are  added  to  or  subtracted  from 
net primary income, the result is the net disposable income 
of  households  (B.6n).  This  income  does  not  include  social 
transfers in kind (D.63) coming from public administrations 
or non-profit institutions serving households (NPISH). 

Thus,  net  disposable  income  (B.6n)  is  the  result  of  all 
preceding  transactions,  i.e.  production,  distribution  and 
redistribution  of  income.  For  many  countries,  the  redis-
tribution of income incorporates substantial inter-regional 
transactions.

Net disposable income (B.6n) is a concept which reflects to 
some  extent  the  ‘material  welfare’  of  households.  Welfare 
as such is a concept which cannot be measured statistically. 
Relatively low regional disposable income of households is 
basically  a  topic  for  EU  policy-making,  although  it  is  not 
referred to as such in the regulations. However, there is no 
doubt that the regional disposable income of households per 
capita is a very important regional indicator. 

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General principles for allocating income transactions and aggregates of households to regions  10

10.2.3. Redistribution of income in kind account 
of households (Table 24.6 Full sequence 
of accounts for households, account II.3 in 
ESA 2010) 

10.2.4. Use of (adjusted) disposable income 
account of households (Table 24.6 Full sequence 
of accounts for households, account II.4.1 and 
II.4.2 in ESA 2010) 

The use of (adjusted) income account describes how the net 
disposable  income  of  households  resident  in  the  regional 
territory  is  divided  between  final  consumption  and  net 
saving.  It  includes  two  variants,  one  based  on  net  dispos-
able income (B.6n) and the other on net adjusted disposable 
income (B.7n). 

Both accounts (II.4.1 and II.4.2) contain an adjustment for 
the  change  in  pension  entitlements  (D.8).  This  is  neces-
sary so that any changes to pension entitlements on which 
households have a definite claim will appear in the savings 
of households. This pension entitlement change arises from 
premiums  and  contributions  recorded  in  the  secondary 
distribution of income account as social contributions (see 
ESA 2010, par. 4.141).

The first variant of the use of disposable income of house-
holds, ‘Individual consumption expenditure, P.31’, which is 
equal to ‘Final consumption expenditure (P.3)’, corresponds 
largely  to  purchases  by  households  of  goods  and  services. 
The  second  variant,  ‘Actual  individual  consumption,  P.41’, 
which is equal to ‘Actual final consumption (P.4)’, includes 
both  individual  consumption  expenditure  (P.31)  and  the 
social  transfers  in  kind  (D.63)  which  households  receive. 
See also Annex 1e, Classification of Individual Consumption 
According to Purpose (COICOP), for an overview of the clas-
sification of individual consumption expenditure (P.31).

Thus the difference between net adjusted disposable income 
(B.7n)  and  net  disposable  income  (B.6n)  is  exactly  the 
same  amount  as  the  difference  between  actual  individual 
consumption  (P.41)  and  individual  consumption  expendi-
ture  (P.31).  Consequently,  net  saving  (B.8n)  is  the  same 
whichever variant is used. 

The  balancing  item  ‘net  saving  of  resident  households’  in 
a  region,  gives  an  indication  of  the  long-term  endurance 
capacity of those households. 

The  redistribution  of  income  in  kind  account  ‘has  the 
specific  purpose  of  showing  social  transfers  in  kind  as  an 
imputed transfer from government to the household sector, 
so that household income can rise by the value of individual 
government  services.  In  the  next  account,  use  of  adjusted 
disposable income account, the household use of disposable 
income  is  increased  by  the  same  amount,  as  if  the  house-
hold sector was buying the individual services provided by 
government. These two imputations cancel out, so that the 
balancing  item  is  saving,  identical  to  saving  in  the  main 
sequence of accounts’ (ESA 2010, par. 1.124).

Social transfers in kind (D.63) are in fact the counterpart of 
individual consumption of the services of general govern-
ment  and  NPISH.  The  Classification  of  the  Functions  of 
Government (COFOG) will generally be used for a distinc-
tion  between  individual  and  collective  consumption  of 
general government services.(30) 

There  are  two  main  transactions  in  this  account:  social 
transfers  in  kind  –  non-market  production  (D.631),  and 
social  transfers  in  kind  –  purchased  market  production 
(D.632).  These  transactions  refer  to:  housing  such  as  indi-
vidual rent allowances (equivalent to COFOG group 10.6), 
health such as exceptional medical health care (equivalent 
to COFOG groups 7.1 to 7.4), recreation and culture (equiva-
lent to COFOG groups 8.1 and 8.2), education (equivalent to 
COFOG groups 9.1 to 9.6), and social protection (equivalent 
to COFOG groups 10.1 to 10.5 and group 10.7). See Annex 1f 
and also Annex 1e for an overview of individual consump-
tion expenditure by NPISH and general government.

These  are  produced  by  general  government  or  non-profit 
institutions and feed into the disposable income of house-
holds  resident  in  the  regional  territory,  resulting  in  net 
adjusted disposable income of households (B.7n). 

Compared  with  disposable  income,  the  regional  adjusted 
disposable income of households (B.7n) can be regarded as 
a closer approximation to the concept of ‘material welfare’. 
Thus,  if  information  on  social  transfers  in  kind  can  be 
obtained,  it  is  strongly  recommended  that  this  balancing 
item and actual final consumption (P.4, see par. 10.2.4) are 
also compiled.

(30) See United Nations Statistics Division: Statistical Papers Series M No. 84 and Manual on 
sources and methods for the compilation of COFOG statistics, Classification of the Functions 
of Government, Eurostat, 2011 edition.

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General principles for allocating income transactions and aggregates of households to regions 

10.3. Sources 

Income distribution statistics provide the income distribu-
tion of individuals as well as of households. In principle, they 
provide the best opportunity for the regionalisation of most 
of the components of income, because the relevant admin-
istrations  have  a  complete  dataset  of  all  individuals  and 
households that pay tax. Regarding this source one should 
be aware of the problems of timeliness and tax evasion, for 
which  estimates  have  to  be  made.  Some  important  differ-
ences from national accounts concepts, such as population 
and certain transactions as mentioned in par. 3.7.3, should 
be noted. 

In addition to consumption, family budget surveys usually 
also  contain  data  on  household  income  components. 
However,  they  do  not  generally  achieve  the  level  of  detail 
and accuracy provided by information on income distribu-
tion  statistics.  The  survey  samples  are  usually  far  smaller 
than  those  used  for  income  distribution  statistics,  leading 
in  most  countries  to  less  reliable  regional  income  and 
consumption  expenditure  data  in  family  budget  surveys. 
For this reason, most of the regional data on final consump-
tion  expenditure  are  taken  from  statistical  sources  other 
than family budget surveys. 

Examples of possible sources for consumption expenditure 
data might be:

 — Daily expenditure on food and beverages: family budget 

surveys.

 — Expenditure on tobacco: retail trade statistics. Note that 
these data are based on the place where the sale occurs, 
which  does  not  necessarily  correspond  to  the  region 
of  residence  of  the  household,  especially  in  the  case  of 
supermarkets  and  such  units.  They  are  certainly  not  a 
good source in areas subject to a high level of tourism.

 — Expenditure  on  durable  consumer  goods:  retail  trade 

statistics and miscellaneous sources.

 — Expenditure on rents by households: housing surveys.

 — Expenditure  on  other  services:  miscellaneous  sources, 

such as surveys about holidays etc.

See Annex 2 for a detailed overview of the transactions and 
possible sources. The national totals of the tables correspond 
to the tables for corresponding national accounts totals in 
ESA 2010.

10.4. The choice of sources and indicators 

Any regionalisation procedure must give priority to statis-
tical sources and indicators based on the households’ place 
of residence (see par. 2.3.2.3 and ESA 2010, par. 13.15 and 

13.51). The regional aggregates should add up to the corre-
sponding aggregates at the national level (31). 

It is likely that a combination of sources has to be used for 
the  compilation  of  the  household  accounts.  The  sources 
have to cover all types of households, if possible separately 
(see  par.  2.3.2.2).  It  will  be  an  A-method  if  all  types  of 
households are treated separately and covered sufficiently. If 
a separate regionalisation of the types of households is not 
possible,  because  no  separate  estimate  has  been  produced 
at the national level, it will also be an A-method when all 
types of households are covered sufficiently. It will become 
a B-method if for instance students, studying for a year or 
more in another region or abroad, are not covered. It will 
become a C-method if important types of household, such 
as old persons living permanently in retirement homes, are 
not adequately covered.

The sources must at least allow a compilation of the accounts 
according  to  the  residence  principle  at  the  NUTS  2  level. 
This  would  be  an  A-method.  It  will  become  a  B-method 
if the compilation has been done at the NUTS 1 level and 
suitable indicators have been used to allocate the NUTS 1 
data to the NUTS 2 level. It will become a C-method if the 
sources  allow  only  a  compilation  at  NUTS  1  or  national 
level and unsuitable regional indicators, such as population, 
have been used, or the residence of households has not been 
taken into account. 

The compilation of the aforementioned household accounts 
(see par. 10.2) should be done at least at a detailed level of 
distributive transactions as provided in Annex 2. This level 
of detail will be classified as an A-method when, if necessary, 
corrections for the non-observed economy, consumption of 
non-residents (32) in the region, consumption of residents in 
other regions (at NUTS 2 level) or in foreign countries have 
been  included,  and  an  acceptable  estimate  has  been  made 
for the operating surplus of owner-occupiers of dwellings. 
The method will become a B-method if the compilation is 
based on a higher level of aggregation of distributive trans-
actions than that provided in Annex 2, and implicit correc-
tions by grossing up have been made for the non-observed 
economy. It will become a C-method if the aforementioned 
interregional  corrections,  if  necessary,  are  not  sufficiently 
taken into account. 

Estimates  of  individual  consumption  expenditure  (P.31) 
should be based on sufficient detail (see Annex 1e), allowing 
the  use  of  different  sources,  such  as  family  expenditure 
surveys  (food),  retail  trade  statistics  (durables,  services), 
housing surveys (rent), administrative data (for instance gas, 
water and electricity), health statistics (healthcare), holiday 

(31) This implies that income and consumption expenditure of households in the extra-

regio territory need to be allocated to the regional territories, preferably in proportion 
to the regional distribution of income and consumption expenditure of households in 
the regional territory respectively. If a top-down method is applied, this will be done 
automatically.

(32) The non-residents could be inhabitants of other regions or other countries.

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surveys  etc.  It  is  important  that  the  indicators  are  related 
to  the  residence  of  the  households.  If  necessary,  correc-
tions have to be made (see above). The compilation of P.31 
should be done at least at the NUTS 2 level. It is likely that 
this information will not be available separately for different 
types of households, so the compilation should be done for 
the total of households as defined in par. 2.3.2. This method 
is an A-method when the sources provide sufficiently reli-
able regional indicators for the regional allocation of P.31, 
and corrections as mentioned before have been made. It will 
become a B-method when less suitable indicators have been 
used, and a C-method when the residence of households has 
not been used or the aforementioned corrections have not 
been made.

Estimates of social transfers in kind (D.63) should be based 
on  the  detail  of  the  relevant  transactions  of  the  COFOG 
classification,  as  mentioned  in  par.  10.2.3  and  Annex  1e. 
The  allocation  of  social  transfers  in  kind  should  be  based 
on  appropriate  regional  indicators  using  a  top-down 
method. This is an A-method. This approach will become a 
B-method when the regional allocation of the transactions 
has been done at a more aggregated level of transactions of 
the COFOG classification, or when the regional indicators 
are less appropriate. The method will become a C-method 
when unsuitable regional indicators have been used.

10.5. The allocation of consumption of 
fixed capital (P.51c)

Consumption of fixed capital (P.51c) is the decline in value 
of fixed assets owned, as a result of normal wear and tear and 
obsolescence. The estimate of the decline in value includes a 
provision for the loss of fixed assets as a result of accidental 
damage  which  can  be  insured  against.  Consumption  of 
fixed capital covers anticipated terminal costs, such as the 
decommissioning costs of nuclear power stations or oil rigs 
or the restoration costs of landfill sites. Such terminal costs 
are recorded as consumption of fixed capital at the end of 
the  service  life,  when  the  terminal  costs  are  recorded  as 
GFCF (ESA 2010, par. 3.139).

Consumption of fixed capital is different from the deprecia-
tion allowed for tax purposes or the depreciation shown in 
business accounts. It is estimated on the basis of the stock 
of fixed assets and the expected average economic life of the 
different categories of those goods. For the calculation of the 
stock of fixed assets, the Perpetual Inventory Method (PIM) 
will be applied at the national level whenever direct infor-
mation on the stock of fixed assets is missing (see also par. 
3.2.2). The stock of fixed assets is valued at the purchasers’ 
prices of the current period (ESA 2010, par. 3.141).

Consumption  of  fixed  capital  consists  of  consumption 
of  fixed  capital  on  gross  operating  surplus  (P.51c1)  and 
consumption  of  fixed  capital  on  gross  mixed  income 
(P.51c2). There are generally no survey data available about 

the consumption of fixed capital. In the national accounts 
this  problem  is  solved  by  applying  the  PIM.  However,  the 
data necessary for the application of the PIM are currently 
not available for the regional accounts. If they were available, 
this would be an A-method. The non-availability suggests 
the  application  of  top-down  methods  for  the  component 
parts of P.51c.

In the accounts of households P.51c1 is linked to the dwell-
ings owned by households. Thus the regional distribution of 
(the market value of) owner-occupied and rented dwellings 
might be an indicator for the regional allocation of P.51c1, 
and  this  would  be  a  B-method.  The  regional  distribution 
of  P.51c2  is  not  straightforward.  Mixed  income  can  be 
generated  in  many  industries,  though  the  core  is  in  agri-
culture,  construction,  the  wholesale  and  retail  trades,  and 
hotels and restaurants. It is probable that no data are avail-
able on P.51c2, and in that case it might be recommended 
by convention to allocate P.51c2 to regions based upon the 
aggregated GVA of these industries as shown in the regional 
accounts by industry. This would be a B-method. 

If P.51c cannot be divided into P.51c1 and P51c2, any distri-
bution based on a general key would become a C-method.

10.6. Links between certain transactions 

Employers’  actual  social  contributions  (D.611)  correspond 
to flow D.121 (ESA 4.92).

Employers’ actual social contributions are paid by employers 
to  social  security  schemes  and  other  employment-related 
social insurance schemes to secure social benefits for their 
employees. As these contributions are made for the benefit 
of the employees, their value is recorded as a component of 
compensation of employees, together with wages and sala-
ries in cash and in kind. The social contributions are then 
recorded as being paid by the employees as current trans-
fers to the social security schemes and other employment-
related social insurance schemes. 

This heading is split into two categories:

a.  Employers’ actual pension contributions (D.6111), corre-

sponding to flow D.1211.

b.  Employers’  actual  non-pension  contributions  (D.6112), 

corresponding to flow D.1212.

Households’  social  contribution  supplements  (D.614)  are 
included in property income payable by the administrators 
of pension funds to households in the allocation of primary 
income  account  (investment  income  payable  on  pension 
entitlements  (D.442),  and  investment  income  attribut-
able  to  collective  investment  fund  shareholders  (D.443) 
(ESA 4.101).

In  practice,  this  income  is  retained  by  the  administrators 
of  pension  funds.  It  is  therefore  treated  in  the  secondary 

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General principles for allocating income transactions and aggregates of households to regions 

distribution of income account as being paid back by house-
holds  to  pension  funds  in  the  form  of  households’  social 
contributions supplements.

10.7. Summary variables, definitions and 
possible sources 

Annex 2 provides an overview of the distributive transac-
tions  and  transactions  in  products  in  the  regional  sector 
accounts of households as discussed in par. 10.2, and also 
provides  definitions  of  the  variables  and  indicates  some 
possible data sources. 

Annex 3 provides a numerical example of regional house-
hold  accounts,  based  on  the  figures  in  the  accounts  for 
households (Table 24.6) in chapter 24 of ESA 2010 (33).

(33) Some of the aggregates in the tables are slightly diﬀerent from the sum of the details 

due to rounding.

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Annexes

Annex 1: Classifications

Annex 1a: Coding of industries (NACE Rev. 2: A*10, A*38 and A*64)

Annexes

Annexes

Annex 1

NACE Rev. 
2 section

Seq. No. 
A*10

Seq. No.
A*38

Seq. No.
A*64

1

2

3
4

A

B
C (= 2a of 
A*10)

D
E

F
G

H

I

1

2
3
4
5

6
7
8

9

10

11
12
13
14

15

16
17

18
19

20

21

1
2
3
4
5
6
7

8
9
10
11
12

13
14
15
16

17
18
19
20
21
22
23
24
25
26
27
28

29
30
31
32
33
34
35
36

NACE  
Rev. 2 
division

01
02
03
05-09
10-12
13-15
16

17
18
19
20
21

22
23
24
25

26
27
28
29
30
31-32
33
35
36
37-39
41-43
45

46
47
49
50
51
52
53
55-56

Description

Crop and animal production, hunting and related service activities
Forestry and logging   
Fishing and aquaculture 
Mining and quarrying 
Manufacture of food products, beverages and tobacco products  
Manufacture of textiles, wearing apparel, leather and related products  
Manufacture of wood and of products of wood and cork, except 
furniture; manufacture of articles of straw and plaiting materials  
Manufacture of paper and paper products    
Printing and reproduction of recorded media   
Manufacture of coke and refined petroleum products   
Manufacture of chemicals and chemical products  
Manufacture of basic pharmaceutical products and  pharmaceutical 
preparations  
Manufacture of rubber and plastic products  
Manufacture of other non-metallic mineral products  
Manufacture of basic metals 
Manufacture of fabricated metal products, except machinery and 
equipment
Manufacture of computer, electronic and optical products 
Manufacture of electrical equipment
Manufacture of machinery and equipment n.e.c. 
Manufacture of motor vehicles, trailers and semi-trailers 
Manufacture of other transport equipment  
Manufacture of furniture; other manufacturing  
Repair and installation of machinery and equipment 
Electricity, gas, steam and air conditioning supply 
Water collection, treatment and supply
Sewerage, waste management and remediation activities 
Construction  
Wholesale and retail trade and repair of motor vehicles  
and motorcycles 
Wholesale trade, except of motor vehicles and motorcycles  
Retail trade, except of motor vehicles and motorcycles 
Land transport and transport via pipelines 
Water transport  
Air transport  
Warehousing and support activities for transportation  
Postal and courier activities  
Accommodation and food service activities  

  Manual on regional accounts methods

109

Annexes

NACE Rev. 
2 section

Seq. No. 
A*10

Seq. No.
A*38

Seq. No.
A*64

J

K

L

M

N

O
P
Q

R

S

T

U

5

6

7

8

9

10

22

23
24

25

26
26a

27

28
29

30

31
32
33
34
35

36

37

38

37
38

39
40

41
42

43
44
44a of 
which:
45

46
47
48
49

50
51
52

53

54
55
56
57
58

59
60
61
62
63

64

NACE  
Rev. 2 
division

58
59-60

61
62-63

64
65

66
68
68

69-70

71
72
73
74-75

77
78
79

80-82

84
85
86
87-88
90-92

93
94
95
96
97-98

99

Description

Publishing activities  
Motion picture, video and television programme production, 
sound recording and music publishing activities; programming and 
broadcasting activities 
Telecommunications  
Computer programming, consultancy and related activities; 
information service activities  
Financial service activities, except insurance and pension funding 
Insurance, reinsurance and pension funding, except compulsory social 
security 

Activities auxiliary to financial services and insurance activities 
Real estate activities  
Of which: Imputed rent of owner-occupied dwellings  

Legal and accounting activities; activities of head offices; management 
consultancy activities 
Architectural and engineering activities; technical testing and analysis  
Scientific research and development  
Advertising and market research  
Other professional, scientific and technical activities; veterinary 
activities
Rental and leasing activities 
Employment activities  
Travel agency, tour operator and other reservation service and related 
activities
Security and investigation activities; services to buildings and 
landscape activities; office administrative, office support and other 
business support activities
Public administration and defence; compulsory social security 
Education  
Human health activities 
Social work activities  
Creative, arts and entertainment activities; libraries, archives, museums 
and other cultural activities; gambling and betting activities
Sports activities and amusement and recreation activities 
Activities of membership organisations  
Repair of computers and personal and household goods 
Other personal service activities  
Activities of households as employers; undiﬀerentiated goods- and 
services-producing activities of households for own use 
Activities of extraterritorial organisations and bodies  

110

Manual on regional accounts methods  

 
Annexes

Annex 1b: Classifications of transactions in products (P)

P.1  

P.11  

P.119  

P.12  

P.13  

Output

Market output

Financial intermediation services indirectly measured (FISIM)

Output for own final use

Non-market output

P.2  

Intermediate consumption

P.3  

P.31  

P.32  

P.4  

P.41  

P.42  

P.5  

P.51g  

P.511  

P.5111  

P.5112  

P.5113  

P.512  

P.51c  

P.51c1  

P.51c2  

P.51n  

P.52  

P.53  

P.6  

P.61  

P.62  

P.7  

P.71 

P.72  

Final consumption expenditure

Individual consumption expenditure

Collective consumption expenditure

Actual final consumption

Actual individual consumption

Actual collective consumption

Gross capital formation/P.5n Net capital formation

Gross fixed capital formation

Acquisitions less disposals of fixed assets

Acquisitions of new fixed assets

Acquisitions of existing fixed assets

Disposals of existing fixed assets

Costs of ownership transfer on non-produced assets

Consumption of fixed capital (-)

Consumption of fixed capital on gross operating surplus (-)

Consumption of fixed capital on gross mixed income (-)

Net fixed capital formation

Changes in inventories

Acquisitions less disposals of valuables

Exports of goods and services

Exports of goods

Exports of services

Imports of goods and services

Imports of goods

Imports of services

  Manual on regional accounts methods

111

10

Annexes

Annex 1c: Classification of institutional sectors (S)

S.1  

S.11 

S.12 

S.13 

S.1311 

S.1312 

S.1313 

S.1314 

S.14 

S.141 

S.142 

S.143 

S.144 

Total economy

Non-financial corporations

Financial corporations

General government

Central government (excluding social security)

State government (excluding social security)

Local government (excluding social security)

Social security funds

Households

Employers

Own-account workers

Employees

Recipients of property and transfer income

S.15 

Non-profit institutions serving households

112

Manual on regional accounts methods  

Annex 1d: Distributive transactions (D)

Annexes
Annexes

10

D.1  

D.11  

D.12  

D.121  

D.1211  

D.1212  

D.122  

D.1221  

D.1222  

D.2  

D.21  

D.211  

D.212  

D.2121  

D.2122  

D.214  

D.29  

D.3  

D.31  

D.311  

D.319  

D.39  

D.4  

D.41  

D.42  

D.421  

D.422  

D.43  

D.44  

D.441  

D.442  

D.443  

Compensation of employees

Wages and salaries

Employers’ social contributions

Employers’ actual social contributions

Employers’ actual pension contributions

Employers’ actual non-pension contributions

Employers’ imputed social contributions

Employers’ imputed pension contributions

Employers’ imputed non-pension contributions

Taxes on production and imports

Taxes on products

Value added type taxes (VAT)

Taxes and duties on imports excluding VAT

Import duties

Taxes on imports excluding VAT and duties

Taxes on products except VAT and import taxes

Other taxes on production

Subsidies

Subsidies on products

Import subsidies

Other subsidies on products

Other subsidies on production

Property income

Interest

Distributed income of corporations

Dividends

Withdrawals from income of quasi-corporations

Reinvested earnings on foreign direct investment

Other investment income

Investment income attributable to insurance policy holders

Investment income payable on pension entitlements

Investment income attributable to collective investment fund shareholders

D.4431  

Dividends attributable to collective investment fund shareholders

  Manual on regional accounts methods

113

Annexes

D.4432  

Retained earnings attributable to collective investment fund shareholders

D.45  

Rent

D.5  

D.51  

D.59  

D.6  

D.61  

D.611  

D.6111  

D.6112  

D.612  

D.6121  

D.6122  

D.613  

D.6131  

D.6132  

D.614  

D.6141  

D.6142  

Current taxes on income, wealth etc.

Taxes on income

Other current taxes

Social contributions and benefits

Net social contributions

Employers’ actual social contributions

Employers’ actual pension contributions

Employers’ actual non-pension contributions

Employers’ imputed social contributions

Employers’ imputed pension contributions

Employers’ imputed non-pension contributions

Households’ actual social contributions

Households’ actual pension contributions

Households’ actual non-pension contributions

Households’ social contribution supplements

Households’ pension contribution supplements

Households’ non-pension contribution supplements

D.61SC  

Social insurance scheme service charges (-) (34)

D.62  

D.621  

D.6211  

D.6212  

D.622  

D.6221  

D.6222  

D.623  

D.63  

D.631  

D.632  

Social benefits other than social transfers in kind

Social security benefits in cash

Social security pension benefits in cash

Social security non-pension benefits in cash

Other social insurance benefits

Other social insurance pension benefits

Other social insurance non-pension benefits

Social assistance benefits in cash

Social transfers in kind

Social transfers in kind — non-market production

Social transfers in kind — purchased market production

(34) Employers’ contributions appear in both the generation of income account and allocation of primary income account as payable by employers and receivable by employees. In 

the secondary distribution of income account, these amounts are payable by households and receivable by those administering social insurance schemes. In order to show exactly 
the same value in each case, the deduction of the charge that represents part of the output of the schemes and final consumption of the beneficiary households is also shown in 
the secondary distribution of income account as a separate item. The item social insurance scheme service charges (D.61SC) is thus an adjustment item only and not a distributive 
transaction in itself.

114

Manual on regional accounts methods  

 
Annexes 10

D.7  

D.71  

D.711  

D.712  

D.72  

D.721  

D.722  

D.73  

D.74  

D.75  

D.751  

D.752  

D.759  

D.76  

Other current transfers

Net non-life insurance premiums

Net non-life direct insurance premiums

Net non-life reinsurance premiums

Non-life insurance claims

Non-life direct insurance claims

Non-life reinsurance claims

Current transfers within general government

Current international cooperation

Miscellaneous current transfers

Current transfers to NPISH

Current transfers between households

Other miscellaneous current transfers

VAT and GNI – based EU own resources

D.8  

Adjustment for the change in pension entitlements

D.9  

D.9r  

D.91r  

D.92r  

D.99r  

D.9p  

D.91p  

D.92p  

D.99p  

Capital transfers

Capital transfers, receivable

Capital taxes, receivable

Investment grants, receivable

Other capital transfers, receivable

Capital transfers, payable

Capital taxes, payable

Investment grants, payable

Other capital transfers, payable

  Manual on regional accounts methods

115

Annexes

Annex 1e: Classification of Individual Consumption According to Purpose (COICOP)

01-12  Individual consumption expenditure of households (P.31)

01  

Food and non-alcoholic beverages

01.1   Food

01.2   Non-alcoholic beverages

02   Alcoholic beverages, tobacco and narcotics

02.1   Alcoholic beverages

02.2   Tobacco

02.3   Narcotics

03  

Clothing and footwear

03.1   Clothing

03.2   Footwear

04   Housing, water, electricity, gas and other fuels

04.1   Actual rentals for housing

04.2  

Imputed rentals for housing

04.3   Maintenance and repair of the dwelling

04.4   Water supply and miscellaneous services relating to the dwelling

04.5   Electricity, gas and other fuels

05  

Furnishings, household equipment and routine household maintenance

05.1   Furniture and furnishings, carpets and other floor coverings

05.2   Household textiles

05.3   Household appliances

05.4   Glassware, tableware and household utensils

05.5   Tools and equipment for house and garden

05.6   Goods and services for routine household maintenance

06   Health

06.1   Medical products, appliances and equipment

06.2   Outpatient services

06.3   Hospital services

116

Manual on regional accounts methods  

Annexes 10

07  

Transport

07.1   Purchase of vehicles

07.2   Operation of personal transport equipment

07.3   Transport services

08  

Communication

08.1   Postal services

08.2   Telephone and telefax equipment

08.3   Telephone and telefax services

09  

Recreation and culture

09.1   Audio-visual, photographic and information processing equipment

09.2   Other major durables for recreation and culture

09.3   Other recreational items and equipment, gardens and pets

09.4   Recreational and cultural services

09.5   Newspapers, books and stationery

09.6   Package holidays

10  

Education

10.1   Pre-primary and primary education

10.2   Secondary education

10.3   Post-secondary non-tertiary education

10.4   Tertiary education

10.5   Education not definable by level

11  

Restaurants and hotels

11.1   Catering services

11.2   Accommodation services

12   Miscellaneous goods and services

12.1   Personal care

12.2   Prostitution

12.3   Personal effects n.e.c.

12.4   Social protection

12.5  

Insurance

12.6   Financial services n.e.c.

12.7   Other services n.e.c.

  Manual on regional accounts methods

117

 
Annexes

13  

Individual consumption expenditure of non  profit institutions serving households (NPISH)

13.1   Housing

13.2   Health

13.3   Recreation and culture

13.4   Education

13.5   Social protection

13.6   Other services

14  

Individual consumption expenditure of general government

14.1   Housing

14.2   Health

14.3   Recreation and culture

14.4   Education

14.5   Social protection

118

Manual on regional accounts methods  

Annex 1f: Classification of the Functions of Government (COFOG 1999)

Annexes 10

01  

01.1  

01.2 

01.3 

01.4 

01.5 

01.6 

01.7  

01.8  

02  

02.1  

02.2  

02.3  

02.4  

02.5  

03  

03.1  

03.2  

03.3  

03.4  

03.5  

03.6  

04  

04.1  

04.2  

04.3  

04.4  

04.5  

04.6  

04.7  

04.8  

04.9  

General public services

Executive and legislative organs, financial and fiscal affairs, external affairs

Foreign economic aid

General services

Basic research

R&D General public services

General public services n.e.c.

Public debt transactions

Transfers of a general character between different levels of government

Defence

Military defence

Civil defence

Foreign military aid

R&D Defence

Defence n.e.c.

Public order and safety

Police services

Fire-protection services

Law courts

Prisons

R&D Public order and safety

Public order and safety n.e.c.

Economic affairs

General economic, commercial and labour affairs

Agriculture, forestry, fishing and hunting

Fuel and energy

Mining, manufacturing and construction

Transport

Communication

Other industries

R&D Economic affairs

Economic affairs n.e.c.

  Manual on regional accounts methods

119

Annexes

05  

05.1  

05.2  

05.3  

05.4  

05.5  

05.6  

06  

06.1  

06.2  

06.3  

06.4  

06.5  

06.6  

07  

07.1  

07.2  

07.3  

07.4  

07.5  

07.6  

08  

08.1  

08.2  

08.3  

08.4  

08.5  

08.6  

09  

09.1  

09.2  

09.3  

09.4  

09.5  

09.6  

Environmental protection

Waste management

Waste water management

Pollution abatement

Protection of biodiversity and landscape

R&D Environmental protection

Environmental protection n.e.c.

Housing and community amenities

Housing development

Community development

Water supply

Street lighting

R&D Housing and community amenities

Housing and community amenities n.e.c.

Health

Medical products, appliances and equipment

Outpatient services

Hospital services

Public health services

R&D Health

Health n.e.c.

Recreation, culture and religion

Recreational and sporting services

Cultural services

Broadcasting and publishing services

Religious and other community services

R&D Recreation, culture and religion

Recreation, culture and religion n.e.c.

Education

Pre-primary and primary education

Secondary education

Post-secondary non-tertiary education

Tertiary education

Education not definable by level

Subsidiary services to education

120

Manual on regional accounts methods  

 
Annexes 10

09.7  

09.8  

10  

10.1  

10.2  

10.3  

10.4  

10.5  

10.6  

10.7  

10.8  

10.9  

R&D Education

Education n.e.c.

Social protection

Sickness and disability

Old age

Survivors

Family and children

Unemployment

Housing

Social exclusion n.e.c.

R&D Social protection

Social protection n.e.c.

  Manual on regional accounts methods

121

 
Annexes

Annex 2: Summary variables, definitions and possible sources of household accounts

Allocation of primary income account

Variable

Definition according to ESA 2010

Possible sources

Code
Resources
B.2n

Net operating surplus

B.3n

Net mixed income

D.11

Wages and salaries

D.121

Employers’ actual social 
contributions 

In the case of own account production of 
housing services by owner-occupier households 
and those leasing dwellings (SNA 2008, par. 7.9), 
the balancing item of the generation of income 
account is operating surplus (and not mixed 
income) (ESA 8.20).
In the case of unincorporated enterprises in the 
household sector, the balancing item of the 
generation of income account implicitly contains 
an element corresponding to remuneration for 
work carried out by the owner or members of 
the family. This income from self-employment 
has characteristics of wages and salaries, and 
characteristics of profit due to work carried out 
as an entrepreneur. This income, neither strictly 
wages nor profits alone, is referred to as ‘mixed 
income’ (ESA 8.19).
Wages and salaries in cash include social 
contributions, income taxes, and other payments 
payable by the employee, including those 
withheld by the employer and paid directly to 
social insurance schemes, tax authorities etc. on 
behalf of the employee.

Wages and salaries in kind consist of goods and 
services, or other non-cash benefits, provided 
free of charge or at reduced prices by employers, 
which can be used by employees in their 
own time and at their own discretion, for the 
satisfaction of their own needs or wants or those 
of other members of their households  
(ESA 4.03 - 4.05).
Employers' actual social contributions (D.121) 
consist of the payments made by employers 
for the benefit of their employees to insurers 
(social security and other employment-related 
social insurance schemes). These payments 
cover statutory, conventional, contractual and 
voluntary contributions in respect of insurance 
against social risks or needs. Employers’ 
actual social contribution is comprised of two 
categories: contributions related to pensions and 
contributions for other benefits (ESA 4.09).

 — Housing surveys.
 — See also par. 2.3.2 for transac-
tions of households’ notional 
units.

 — Regional accounts for agricul-

ture. 

 — Regional accounts of industries.
 — Fiscal sources.
 — Housing surveys.
 — See also par. 2.3.2 for transac-
tions of households’ notional 
units.

 — Administrative sources:

•	 Annual wage and salary 

returns.

•	 Statistics of wages and salaries 

of public servants.

•	 Fiscal sources.
•	 Numbers of wage- and salary-

earners in the region.

•	 Number of residents in the 
regions employed abroad.

•	 Housing surveys.

 — Administrative sources:

•	

 Regional statistics of social 
security institutions. 
•	 Private social insurance 

schemes.

 — Numbers of wage and salary 

earners in the region.

 —  D.121 corresponds with D.611.

122

Manual on regional accounts methods  

Annexes 10

Code

D.122

Variable
Employers’ imputed social 
contributions

D.41

Interest received

D.421

Dividends

D.422

D.43

Withdrawals from income 
of quasi corporations 

Reinvested earnings on 
foreign direct investment

D.441

Investment income attrib-
utable to insurance policy 
holders

D.442

Investment income payable 
on pension entitlements

Possible sources
 — Administrative sources:

•	 Regional statistics of social 

•	

security institutions. 
 Private social insurance 
schemes.

 — Numbers of wage and salary 

earners in the region.

 — D.122 corresponds with D.612.

 — Administrative sources:
•	 Fiscal sources.
•	 Regional distribution of 
deposits of households  
(information from banks).

 — Administrative sources:
•	 Fiscal sources.

 — Administrative sources:
•	 Fiscal sources.

 — Administrative sources:
•	 Fiscal sources.

 — Sources used for the 

regionalisation of premiums 
(related to D.71).

 — Demographic sources.
 — Sources used for the 

regionalisation of social 
contributions.

 — D.442 corresponds to D.6141.

Definition according to ESA 2010

Employers’ imputed social contributions (D.122) 
represent the counterpart to other social 
insurance benefits (less eventual employees’ social 
contributions) paid directly by employers to their 
employees or former employees and other eligible 
persons, without involving an insurance enterprise 
or autonomous pension fund, and without creating 
a special fund or segregated reserve for the 
purpose. As the cost of these benefits forms part of 
employers’ labour costs, they are also included in 
the compensation of employees (ESA 4.10).
Interest (D.41) is property income receivable by 
the owners of the following financial assets: 

(a) Deposits (AF.2).
(b) Debt securities (AF.3).
(c) Loans (AF.4).
(d) Other accounts receivable (AF.8).

Interest is received for putting the financial asset at 
the disposal of another institutional unit (ESA 4.42).
Dividends (D.421) are a form of property income 
to which owners of shares (AF.5) become entitled 
as a result of, for example, placing funds at the 
disposal of corporations (ESA 4.53).
Withdrawals from the income of quasi-corpo-
rations (D.422) are the amounts which entre-
preneurs withdraw for their own use from the 
profits earned by the quasi-corporations which 
belong to them  (ESA 4.58). 
Reinvested earnings on foreign direct investment 
(D.43) are equal to the operating surplus of the 
foreign direct investment enterprise, 

plus any property incomes or current transfers 
receivable, 

minus any property incomes or current transfers 
payable, including actual remittances to foreign 
direct investors and any current taxes payable 
on the income, wealth, etc., of the foreign direct 
investment enterprise (ESA 4.64).
Investment income attributable to insurance 
policy holders (D.441) corresponds to total 
primary incomes received from the investment 
of insurance technical reserves. These reserves 
are those where the insurance corporation 
recognises a corresponding liability to the 
policyholders (ESA 4.68).
The investment income payable on defined 
contribution entitlements (D.442) is equal to 
the investment income on the funds plus any 
income earned by renting land or buildings 
owned by the fund. 
The value of the entitlements existing at the start 
of the year increases because the date when the 
entitlements become payable has become one 
year nearer. This increase is regarded as investment 
income attributed to the pension holders in the 
case of a defined benefit scheme (ESA 4.69).

  Manual on regional accounts methods

123

Annexes

Code

D.443

Variable

Definition according to ESA 2010

Investment income 
attributable to collective 
investment fund 
shareholders

Investment income attributable to collective 
investment fund shareholders (D.443), including 
mutual funds and unit trusts, is composed of two 
separate items:

Possible sources
 — Administrative sources.
 —  Demographic data. 
 —  D.443 corresponds to D.6142.

D.45

Rent received

 — Dividends attributable to collective invest-

ment fund shareholders (D.4431).

 — Retained earnings attributable to collective 
investment fund shareholders (D.4432) (ESA 
4.70).

Rent (D.45) is the income receivable by the 
owner of a natural resource for putting the 
natural resource at the disposal of another insti-
tutional unit (ESA 4.72).

Uses
D.41

Interest paid

See above

D.45

Rent paid

See above.

 —  Regional accounts for agricul-

ture.

 —  Data on sub-soil deposits.
 — Administrative sources.

 —  Administrative sources:

•	
 Regional data on housing.
•	 Consumer loans outstanding.

 —  Regional accounts for agricul-

ture.

 —  Data on sub-soil assets.
 —  Administrative sources.

124

Manual on regional accounts methods  

Secondary distribution of income account

Annexes

10

Variable

Definition according to ESA 2010

Possible sources

Code
Resources
D.621

Social security benefits in 
cash

D.622

Other social insurance 
benefits

 —  Administrative sources:

•	

 Regional statistics of social 
insurance institutions.

 —  Private insurance schemes.

Social security benefits in cash (D.621) are social 
insurance benefits payable in cash to house-
holds by social security funds. These benefits are 
provided under social security schemes and
may be split between:

 — Social security pension benefits in cash 

(D.6211).  

 — Social security non-pension benefits in cash 

(D.6212) (ESA 4.103).

Reimbursements are excluded and treated as 
social transfers in kind (D.632).
Other social insurance benefits (D.622) cor-
respond to benefits payable by employers in 
the context of other employment-related social 
insurance schemes. Other employment-related 
social insurance benefits are social benefits (in 
cash or in kind) payable by social insurance 
schemes (other than social security) to con-
tributors to the schemes, their dependants or 
survivors.

They typically include:

a) The continued payment of normal, or reduced, 
wages during periods of absence from work as 
a result of ill health, accident, maternity etc.
b) The payment of family, education or other 

allowances in respect of dependants.
c) The payment of retirement or survivors' 

pensions to ex-employees or their survivors, 
and the payment of severance allowances 
to workers or their survivors in the event of 
redundancy, incapacity, accidental death etc. 
(if linked to collective agreements).

d) General medical services not related to the 

employee's work. 

e) Hospital/nursing and retirement homes (ESA 

4.104).

  Manual on regional accounts methods

125

Annexes

Code

D.623

Variable
Social assistance benefits 
in cash

D.72

D.75

Uses
D.51

Non-life direct insurance 
claims

Miscellaneous current 
transfers received

Taxes on income

D.59

Other current taxes

D.611

D.612

D.613

D.614

Employers’ actual social 
contributions

Employers’ imputed social 
contributions

Households’ actual social 
contributions

Households’ social 
contribution supplements

Definition according to ESA 2010
Social assistance benefits in cash (D.623) are 
current transfers payable to households by 
government units or NPISH to meet the same 
needs as social insurance benefits, but which 
are not made under a social insurance scheme 
requiring participation, usually by means of social 
contributions (ESA 4.105).
Non-life insurance claims (D.72) are the claims 
that arise under contracts in respect of non-life 
insurance, i.e.  the amounts which insurance 
enterprises are obliged to pay in settlement of 
injuries or damage suﬀered by persons or goods
(including fixed capital goods) (ESA 4.114).
Current transfers between households (D.752) 
consist of all current transfers in cash or in kind 
made, or received, by resident households to, or 
from, other resident or non-resident households 
(ESA 4.129).

Taxes on income (D.51) consist of taxes on 
incomes, profits and capital gains. They are 
assessed on the actual or presumed incomes 
of individuals, households, corporations or 
NPISH. They include taxes assessed on holdings 
of property, land or real estate where these 
holdings are used as a basis for estimating the 
income of their owners (ESA 4.78).
Other current taxes (D.59) include:

a) Current taxes on capital, which consist of taxes 
payable on the ownership or use of land or 
buildings by owners, and current taxes on net 
wealth and on other assets, for example jewellery.
b) Poll taxes, levied per adult or per household, 

independently of income or wealth.
c) Expenditure taxes, payable on the total 
expenditures of persons or households.

d) Payments by households for licences to own 
or use (for non-business purposes) vehicles, 
boats or aircraft, or for licences for recreational 
hunting, shooting or fishing etc. (ESA 4.79).
Employers' actual social contributions (D.611) are 
paid by employers to social security schemes 
and other employment-related social insurance 
schemes to secure social benefits for their 
employees (ESA 4.92).
Employers’ imputed social contributions (D.612) 
represent the counterpart to social benefits 
(less eventual employees' social contributions) 
paid directly by employers (i.e. not linked 
to employers' actual contributions) to their 
employees or former employees and other 
eligible persons (ESA 4.97).
Households’ actual social contributions (D.613) 
are contributions payable on their own behalf 
by employees, self-employed or non-employed 
persons into social insurance schemes (ESA 4.100).
Households’ social contribution supplements 
(D.614) consist of the property income earned 
during the accounting period on the stock of 
pension and non-pension entitlements (ESA 4.101).

Possible sources
 — Administrative sources:

•	

 Regional statistics of social 
assistance institutions.

 — Regional indicators for each risk in 
respect of which a claim is paid: 
•	 Regional population patterns.
•	

 Regional housing stock 
patterns.

•	 Numbers of accidents etc.

 — Administrative sources:

•	 General government accounts.
•	 Accounts of non-profit institutions.

 — Demographic data.
 — Socio-economic data.

 — Administrative sources: 

•	 Fiscal  sources

 — Administrative sources:
•	 Fiscal sources.
 — Demographic data.
 — Distribution of the vehicles used 
for non-business purposes.

 — Employers’ actual social 

contributions (D.611) correspond 
to flow D.121.
•	 See D.121.

 — Employers’ imputed social 

contributions (D.612) correspond 
to flow D.122.
•	 See	D.122•

 —  Regional distribution of 

employment.

 —  See D.442 and D.443.

126

Manual on regional accounts methods  

Annexes

10

Code

D.71

Variable

Net non-life insurance 
premiums

D.751

Miscellaneous current 
transfers paid to NPISH

D.752

Current transfers between 
households

D.759

Other miscellaneous 
current transfers

Definition according to ESA 2010
Net non-life insurance premiums (D.71) provide 
cover against various events or accidents 
resulting in:

a) Damage to goods or property, or harm to 

persons, as a result of natural or human causes, 
examples being fires, floods, crashes, collisions, 
theft, violence, accidents, sickness etc.

b) Financial losses resulting from events such as 

sickness, unemployment, accidents etc. (ESA 4.112).

Current transfers to NPISH (D.751) include all 
voluntary contributions (other than legacies), 
membership subscriptions and financial assis-
tance which NPISH receive from households 
(including non-resident households) and, to a 
lesser extent, from other units (ESA 4.125).
Current transfers between households (D.752) 
consist of all current transfers in cash or in kind 
(made or received) between resident households 
and other resident or non-resident households. 
In particular, these comprise remittances by 
emigrants or workers permanently settled 
abroad (or working abroad for a period of a year 
or longer) to members of their family living in 
their country of origin, or by parents to children 
in another location (ESA 4.129).
Fines and penalties imposed on institutional 
units by courts of law or quasi-judicial bodies are 
treated as compulsory current transfers (ESA 4.132).

Possible sources
 —  Regional indicators for each risk 
in respect of which a premium is 
paid.
•	
•	
•	

 Regional population patterns.
 Regional housing patterns.
 Numbers of accidents etc.

 —  Administrative data from trade 

unions and other NPISH.

 —  Administrative data from the 

Central Bank.

 —  Regional distribution of students.
 —  Demographic data.

 —  Administrative data, for example 
from the Ministry of Justice.

Redistribution of income in kind account

Code
Resources
D.63

Variable

Definition according to ESA 2010

Possible sources

Social transfers in kind

Social transfers in kind (D.63) consist of individual 
goods and services provided free or at prices 
that are not economically significant. They are 
provided for individual households, by govern-
ment units and NPISH, whether purchased on 
the market or produced as non-market output 
by government units or NPISH. They are financed 
out of taxation, other government income or 
social security contributions, or out of donations 
and property income in the case of NPISH 
(ESA 4.108).

 —  Regional statistics of social 

security institutions.

 —  Demographic data (allowances 
in kind granted by non-profit 
institutions).

 —  The regional breakdown of indi-
vidualised non-market services 
could be based on existing 
sources but will probably require 
specific work, in particular for 
the regionalisation of services 
provided by central government.

Use of disposable income account

Code
Resources
D.8

Variable

Definition according to ESA 2010

Possible sources

Adjustment for the change 
in pension entitlements

The adjustment for the change in pension enti-
tlements (D.8) is required to reflect in the saving 
of households the change in the pension entitle-
ments on which households have a definite 
claim. The pension entitlement change comes 
from premiums and contributions recorded in 
the secondary distribution of income account as 
social contributions (ESA 4.141).

 —  Basically, the adjustment for 
the change in net equity of 
households on the basis of its 
component parts.

  Manual on regional accounts methods

127

Annexes

Code

Variable

Definition according to ESA 2010

Possible sources

Uses
P.3

Final consumption 
expenditure

 — Household expenditure survey.
 —  Retail trade statistics.
 —  Housing surveys.
 —  Administrative data from utility 

companies
 —  Mobility surveys.
 —  Holiday surveys.
 —  Health surveys.
 —  Census and/or Labour Force 

Survey for the composition of 
households in combination 
with data from the Household 
Expenditure Survey.

Final consumption expenditure (P.3) consists of 
expenditure incurred by resident institutional 
units on goods or services that are used for the 
direct satisfaction of individual needs or the 
collective needs of members of the community 
(ESA 3.94).

Household final consumption expenditure 
includes the following examples:
a) Services of owner-occupied dwellings.
b) Income in kind, such as:

1) Goods or services received as income in 

kind by employees.

2) Goods or services produced as outputs 
of unincorporated enterprises owned 
by households that are retained for 
consumption by members of the 
household. Examples are food and other 
agricultural goods, housing services by 
owner-occupiers and household services 
produced by employing paid staﬀ (servants, 
cooks, gardeners, chauﬀeurs etc).

c) Items not treated as intermediate 

consumption, such as:
1) Materials for small repairs and interior 
decoration of dwellings carried out by 
tenants as well as owners.

2) Materials for repairs and maintenance to 
consumer durables, including vehicles.
d) Items not treated as capital formation, in 

particular consumer durables, that continue to 
perform their function in several accounting 
periods; this includes the transfer of ownership 
of some durables from an enterprise to a 
household.

e) Financial services directly charged and the 
part of FISIM used for final consumption 
purposes by households.

f)  Insurance services by the amount of the 

implicit service charge.

g) Pension funding services by the amount of the 

implicit service charge.

h) Payments by households for licences, permits 

etc., which are regarded as purchases of services. 

i) The purchase of output at economically 

insignificant prices, e.g. entrance fees for a 
museum.

All household final consumption expenditure 
is individual (ESA 3.103).

Use of adjusted disposable income account

Code

Variable

Definition according to ESA 2010

Possible sources

Uses
P.4

Actual final consumption

Actual final consumption (P.4) consists of the 
goods or services acquired by resident insti-
tutional units for the direct satisfaction of 
human needs, whether individual or collective 
(ESA 3.100).

 —  Individual consumption expendi-
ture (P.31) + Social transfers in 
kind (D.63).

128

Manual on regional accounts methods  

Annexes

10

Annex 3: Numerical example of regional household accounts

Table 1: Allocation of primary income account of households  
(Table 24.6 Full sequence of accounts for households, Account II.1.2 in ESA 2010) (1)

R/U

Code

Transaction/Balancing item

R

U

B.2n
B.3n
D.1
D.11
D.12
D.121
D.1211
D.1212
D.122
D.1221
D.1222
D4
D.41
D.42
D.421
D.422

D.43

D.44

D.441

D.442

D.443

D.4431

D.4432

D.45
D.4
D.41
D.45
B.5n

Net operating surplus
Net mixed income
Compensation of employees
Wages and salaries
Employer’s social contributions
Employer’s actual social contributions
Employer’s actual pension contributions
Employer’s actual non-pension contributions
Employer’s imputed social contributions
Employer’s imputed pension contributions
Employer’s imputed non-pension contributions
Property income
Interest
Distributed income of corporations
Dividends
Withdrawals from Income of quasi corporations
Reinvestment earnings on foreign direct 
investment
Other investment income
Investment income attributable to insurance 
policy holders
Investment income payable on pension 
entitlements
Investment income attributable to collective 
investment fund shareholders
Dividends attributable to collective investment 
fund shareholders
Retained earnings attributable to collective 
investment fund shareholders
Rent
Property income
Interest
Rent
Net balance of primary incomes

(1) Some aggregates are slightly diﬀerent from the sum of the details due to rounding oﬀ.

a
6.9
21.2
113.3
95.4
17.9
16.3
15.1
1.2
1.6
1.6

16.3
7.4
4.0
2.6
1.4

2.8

2.0

0.8

0.0

Regions
c
b
17.3
24.2
18.6
5.3
288.3
405.1
238.5
333.9
49.8
71.2
45.3
64.3
42.0
59.6
3.3
4.6
4.5
7.0
6.4
4.5
0.6
48.8
19.6
7.0
4.6
2.5

27.1
9.8
5.0
3.3
1.8

3.0

11.8

7.0

2.8

2.0

2.0

7.0

5.0

2.0

0.0

d
20.7
8.0
347.3
286.2
61.1
55.2
51.2
4.0
5.9
5.5
0.4
31.0
12.3
4.0
2.6
1.4

8.4

6.0

2.4

0.0

2.1
4.8
0.7
4.1
152.9

7.4
13.7
5.6
8.1
469.6

5.3
10.3
3.5
6.8
340.9

6.3
12.3
4.2
8.1
394.6

Extra-
regio
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

-

-

-

-

-

-

-

-
-
-
-
-

Total economy

69.0
53.0
1 154.0
954.0
200.0
181.0
168.0
13.0
19.0
18.0
1.0
123.0
49.0
20.0
13.0
7.0

3.0

30.0

20.0

8.0

2.0

2.0

0.0

21.0
41
14
27
1 358

  Manual on regional accounts methods

129

Regions
c
b
340.9
469.6
94.9
140.2

a
152.9
49.8

d
394.6
135.2

Extra-
regio
.
.
.

Annexes

Table 2: Secondary distribution of income account  
(Table 24.6 Full sequence of accounts for households, Account II.2 in ESA 2010)

R/U

Code

Transaction/Balancing item

R

B.5n

U

D.61

D.62

D.621
D.6211
D.6212
D.622
D.6221
D.6222
D.623
D7
D.72
D.721
D.75
D.751
D.752
D.759

D.5
D.51
D.59
D.61
D.611
D.6111
D.6112
D.612
D.6121
D.6122
D.613
D.6131
D.6132
D.614
D.6141

D.6142

D.61SC
D.62

D.7
D.71
D.711
D.75
D.751
D.752
D.759
B.6n

Net balance of primary incomes
Current transfers
Net social contributions
Social benefits other than soial transfers in 
kind
Social security benefits in cash
social security pension benefits in cash
social security non-pension benefits in cash
Other social insurance benefits
Other social insurance pension benefits
Other social insurance non-pension benefits
Social assistance benefits in cash
Other current transfers
Non-life insurance claims
Non-life direct insurance claims
Miscellaneous current transfers
Current transfers to NPISHs
Current transfers between households
Other miscellaneous current transfers
Current transfers
Current taxes on income, wealth, etc.
Taxes on income
Other current taxes
Net social contributions
Employers' actual social contributions
Employers' actual pension contributions
Employers' actual non-pension contributions
Employers' imputed social contributions
Employers' imputed pension contributions
Employers' imputed non-pension contributions
Households' actual social contributions
Households' actual pension contributions
Households' actual non-pension contributions
Households' social contributions supplements
Households' pension contributions supplements

Households' non-pension contributions  
supplements

46.3

126.9

86.2

124.7

10.6
9.0
1.6
37.9
24.0
2.9
7.8
3.5
3.5
3.5
0.0

56.1
17.8
17.6
0.2
31.2
16.3
15.1
1.2
1.8
1.8

12.9
11.5
1.4
0.8
0.8

0.0

13.7
11.3
2.4
97.7
87.5
10.2
15.6
13.3
12.3
12.3
1.0

1.0

206.2
62.3
61.6
0.7
119.0
64.3
59.6
4.6
6.9
6.3
0.6
45.2
40.3
4.9
4.8
2.8

2.0

15.9
13.5
2.4
57.3
50.0
7.3
13.0
8.8
8.8
8.8
0.0

144.8
44.5
44.0
0.5
82.5
45.3
42.0
3.3
4.5
4.5

32.3
28.8
3.5
2.0
2.0

0.0

12.9
11.3
1.6
96.2
87.5
8.7
15.6
10.5
10.5
10.5
0.0

175.0
53.4
52.8
0.6
100.3
55.2
51.2
4.0
5.8
5.4
0.4
38.7
34.5
4.2
2.4
2.4

0.0

Social insurance scheme service charges

-0.6

-2.1

-1.5

-1.8

Social benefits other than social transfers  
in kind

Other current transfers
Net non-life insurance premiums
Net non-life direct insurance premiums
Miscellaneous current transfers
Current transfers to NPISHs
Current transfers between households
Other miscellaneous current transfers
Net disposable income

7.1
3.1
3.1
4.0
2.9
0.7
0.4
146.6

24.9
10.9
10.9
14.0
10.2
2.5
1.4
403.6

17.8
7.8
7.8
10.0
7.3
1.8
1.0
291.0

21.3
9.3
9.3
12.0
8.7
2.1
1.2
354.7

.

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

.

.

.

.
.
.
.
.
.
.
.

Total economy

1 358.0
420.0
0.0

384.0

53.0
45.0
8.0
279.0
250.0
29.0
52.0
36.0
35.0
35.0
1.0
0.0
1.0
0.0
582.0
178.0
176.0
2.0
333.0
181.0
168.0
13.0
19.0
18.0
1.0
129.0
115.0
14.0
10.0
8.0

2.0

-6.0

0.0

71.0
31.0
31.0
40.0
29.0
7.0
4.0
1 196.0

130

Manual on regional accounts methods  

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annexes

10

Table 3: Redistribution of income in kind account and use of (adjusted) disposable income account

R/U

Code

Transaction/Balancing item

Regions

a

b

c

d

Extra-
regio

Total economy

Redistribution of income in kind account  
(Table 24.6 Full sequence of accounts for households, Account II.3 in ESA 2010)

R

U

B.6n
D.63
D.631

D.632

B.7n

Net disposable income
Social transfers in kind
Social transfers in kind-non-market production
Social transfers in kind- purchased market 
production
Net adjusted disposable income

146.6
42.6
42.2

403.6
75.3
73.9

291 354.7
64.5
32.7
63.3
31.7

0.4

1.4

1

1.2

189.2

478.9 323.7 419.2

Use of disposable income account  
(Table 24.6 Full sequence of accounts for households, Account II.4.1 in ESA 2010)

R

U

B.6n
D.8

P3
P.31
B.8n

Net disposable income
Adjustment for the change in pension enti-
tlements
Final consumption expenditure
Individual consumption expenditure
Net saving

146.6
1.1

121.8
121.8
25.9

403.6
3.9

291 354.7
3.3
2.8

335 274.1 284.2
284.2
274.1
335
73.8
19.7
72.5

Use of adjusted disposable income account  
(Table 24.6 Full sequence of accounts for households, Account II.4.2 in ESA 2010)

R

U

B.7n
D.8

P4
P.41
B.8n

Net adjusted disposable income
Adjustment for the change in pension enti-
tlements
Actual final consumption
Actual individual consumption
Net saving

189.2

478.9 323.7 419.2

1.1

3.9

2.8

3.3

1 64.4
1 64.4
25.9

410.2 306.7 348.7
348.7
306.7
410.2
73.8
19.7
72.5

Average population
Primary income per capita
Net disposable income per capita
Net adjusted disposable income per capita

9.75
15.7
15
19.4

22.75
20.6
17.7
21.1

13
26.2
22.4
24.9

19.5
20.2
18.2
21.5

-
-
-

-

-

-
-

-
-
-

-

-

-
-
-

-
-
-
-

1 196
215
211

4

1 411

1 196
11

1 015
1 015
192

1 411

11

1 230
1 230
192

65
20.9
18.4
21.7

  Manual on regional accounts methods

131

Annexes

Annex 4: Differences between ESA 1995 and ESA 2010, relevant for regional accounts 
purposes

Some notable differences between ESA 1995 and ESA 2010 are mentioned here:

1. 

 Local KAUs: ESA 13.21, sections b) and c) provide new texts about respectively ‘production units without significant 
labour input’ and ‘production activity without a fixed location’.

2. 

 ESA 13.40 provides another concept for the allocation of FISIM to user industries.(35) 

3. 

 ESA 13.44 is a new item about per inhabitant data and the fact that these data are not calculated for the extra-regio terri-
tory.

4. 

 ESA 13.46-13.48 regard a new item for regional accounts: the compilation of volume growth rates of regional GVA.

5. 

 ESA 13.55 regards an extension of the regional household accounts with the use of income accounts.

6. 

 ESA 13.55 regards a new item for the regional accounts: social transfers in kind.

7.  Though not mentioned explicitly in chapter 13 of ESA 2010, attention should be drawn to conceptual changes for GFCF 

(see ESA 2010, par. 3.124 - 3.129):

a.  Weapons systems.

b.  Research and development.

c.  Databases.

(35) The concept to allocate FISIM to user industries has been applied by the Member States from 2005 on.

132

Manual on regional accounts methods  

Index

10

Index

A

A, B and C-methods, 11, 20, 42, 57, 59, 73
Abbreviations, 10
Accommodation and food service activities, 74, 76
Accuracy, 20, 42, 43
actual final consumption expenditure, 17
Adjustment, 39
Administrative, 59, 98
Ancillary units, 24
Annex, 16, 43, 49, 82, 101, 105, 106, 107, 108
Annual average of employed persons, 99

B

Bottom-up, 34, 38, 43, 44, 45
Building sites, 58

C

CFC, 10, 50, 51, 53
Classification of Individual Consumption According to 
Purpose, 10, 105
Classification of Products by Activity, 10
Classification of the Functions of Government, 10, 105
COFOG, 10, 105, 107
COICOP, 10, 105
Commuting, 23
Compensation of employees, 27, 32, 36, 39, 49, 61, 62, 65, 
66, 72, 78, 100, 101
Consortia, 57, 58
Construction, 56, 57, 74, 75, 94
Consumer Price Index, 10
CPA, 10, 44, 82
CPI, 10, 77

D

Data required, 32
Deflation method, 72
Differences in transaction concepts, 40

E

EAA/EAF, 10, 56
Economic territory, 22
Education, 74, 79
EFRD, 10, 18
EIB, 10, 18
Electricity, gas, steam and air conditioning supply, 56, 57, 94
Employees, 23, 28, 100
Employment, 22, 98, 99
ESS, 10, 19
Extrapolation method, 72

F

Farm Structure Survey, 10, 75
Final consumption expenditure, 45, 105
Financial and insurance activities, 56, 65, 74, 77
Financial Intermediation Services Indirectly Measured, 10
FISIM, 10, 19, 56, 65, 66, 77
FSS, 10, 75

G

GDP, 10, 11, 14, 16, 18, 24, 36, 47, 52, 53, 70, 77, 100, 104
GDP per capita, 18, 24, 52, 53, 104
GFCF, 10, 14, 16, 18, 19, 22, 25, 26, 32, 33, 34, 36, 38, 39, 42, 
44, 45, 81, 82, 83, 87, 91, 93, 94, 95, 107
GNI, 10, 14, 48
GOS, 10, 49, 50, 51, 53, 56, 57, 65, 66, 73, 74
Gross National Income, 10, 48
Gross Operating Surplus, 10
Gross Value Added, 10, 11, 14, 16
Growth rate, 32
GVA, 10, 14, 16, 18, 19, 22, 23, 24, 26, 32, 33, 34, 35, 36, 37, 
38, 41, 42, 43, 44, 47, 48, 49, 50, 51, 52, 53, 55, 56, 57, 58, 59, 
60, 61, 62, 63, 64, 65, 66, 67, 69, 70, 71, 72, 73, 74, 75, 76, 78, 
79, 98, 100, 101, 102, 107

H

Head offices, 26
Hours of work, 100
Hours worked, 50, 51, 53
Households, 10, 27, 28, 107
Human health activities, 74, 79

I

Income approach, 72
Indicators, 39, 82
Information and communication, 56, 59, 94, 95
Intermediate consumption, 50, 51, 53

J

Jobs, 100

K

KAU, 10, 24, 25, 32, 34, 35, 38, 42, 44, 48, 50, 52, 58
Kind-of-Activity Unit, 10

L

Labour Force Survey, 10, 33, 98
Labour productivity, 36, 100
LFS, 10, 33, 43, 98, 101

  Manual on regional accounts methods

133

S

SBS, 10, 32, 33, 34, 35, 36, 41, 50, 58, 59, 60, 74, 98, 101
Self-employed, 100
Significant labour input, 25
SNA, 10, 14, 15, 28, 29, 40, 48
Statistical discrepancies, 40
Structural Business Statistics, 10, 32, 98
Subsidies, 52
Supply and Use tables, 33, 43, 49, 72
System of National Accounts, 10, 14

T

Taxes, 52
Territorial exclaves, 22
Time series, 71
Top-down methods, 35, 44, 45
Transportation and storage, 56, 59, 94, 95
Treaty of Rome, 18

U

Uniregional, 24, 58, 59
Units, 10, 18, 22, 23, 25

V

Value added, 49, 52, 59
Value Added Tax, 10, 52
VAT, 10, 52, 98
Volume indicators, 78

W

Wholesale and retail trade; repair of motor vehicles and 
motorcycles, 74, 75

Index

M

Method, 10, 32, 42, 72, 107
Mixed methods, 35
Multiregional, 24

N

NACE, 10, 16, 27, 33, 42, 43, 44, 55, 56, 57, 59, 60, 62, 65, 
66, 72, 73, 74, 75, 76, 82, 94, 101, 102
Net Operating Surplus, 10
Nomenclature of Territorial Units for Statistics, 10, 18, 22
Non-Profit Institutions Serving Households, 10
NOS, 10, 50, 51
NPISH, 10, 24, 104, 105
NUTS, 10, 14, 18, 22, 32, 33, 34, 35, 39, 42, 43, 56, 82, 83, 87, 
98, 101, 102, 106, 107

O

Output, 36, 43, 51, 52, 53, 59, 77, 78
output approach, 44
owner basis, 17

P

Patients, 29
Perpetual Inventory Method, 10, 32, 42, 72, 107
PIM, 10, 32, 42, 107
Population, 40
Process tables, 48
Production activities, 19
Production approach, 72
Property income, 27
Pseudo-bottom-up, 38, 43

Q

QAF, 10, 19, 20
Quality, 10, 19, 76, 77

R

R&D, 10, 33, 52
Real estate activities, 56, 74, 77
Regional accounts, 11, 14, 15, 16, 19, 32, 33, 34, 39, 40, 43, 
45, 66
Regional labour data, 16, 44
Research and Development, 10
Residence, 15, 23, 28
Revisions, 41, 42, 79

134

Manual on regional accounts methods  

European Commission

Manual on regional accounts methods

Luxembourg: Publications Office of the European Union

2013 — 134 pp. — 21 x 29.7 cm

Theme: Economy and finance 
Collection: Manuals and guidelines

iSbn 978-92-79-32356-0
iSSn 2315-0815
doi: 10.2785/33649
Cat. No: KS-GQ-13-001-EN-N

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doi: 10.2785/33649