CONCEPTS AND METHODS

The main concepts of the national accounts can be illustrated by an example. Assume that there are only three transactions in a given period:

• Fishermen sell fish at shore facilities for 100
• Land plants process fish and sell them for a retail sale for 150
• Retailers sell the fish to households for 300

The production and income of this society (GDP/GFI) can in principle be calculated three ways:

The total value of the production is 550 (= 100+150+300). The expenses which the parties have had buying goods from each other amounting to a total of 250 (=100+150) must, however, be deducted from this. The GDP can thus be calculated as the production value minus the purchase of raw materials, i.e. 300 (=550-250). National accounts, in which the GDP is calculated from data on the production and cost of businesses is said to be production-based.

At the same time, the income generated in the professions, is also equal to the 300. The income can be distributed to trawler owners and the crew. National accounts, in which the GDP is calculated from data on incomes in the economy, is said to be income-based.

Finally, it can be seen that households are able to consume fish for 300. National accounts, in which the GDP is calculated from information on use of goods and services in the economy, is said to be use-based. Assuming that the economy receives a transfer from abroad, such as a block grant, the income of the society increases. If the transfer is e.g. 50, the available gross national income of society will be 350 (=300+50). This offers an opportunity for increased consumption through e.g. imports from abroad. So-called income-based national accounts are prepared which became possible after 1975 when income taxes were introduced. The calculations of the income-based national accounts are based primarily on information from the taxation authorities.

Production-based national accounts are based primarily on data from the financial statements of producing companies. The production-based national accounts give a far truer picture of the production. At the same time, it contains much more detail about the interaction between the lines of business in society and the use of production for export, consumption, and investment. The income-based national accounts contain little information about the production of society by line of industry.

The calculations which Statistics Greenland regularly undertake are limited to the main items, namely the gross domestic product (GDP), the gross factor income factor (GFI), the gross national product (GNP), and the available gross national income. However, the current national accounts provide a thorough illustration of government activities which play a significant role for the Greenlandic economy. As a separate project, an input-output table for 2004 has been produced in connection with the preparation of the production-based national accounts. The table can be downloaded from www.stat.gl.