Gross value added

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In economics, gross value added (GVA) is the measure of the value of goods and services produced in an area, industry or sector of an economy. In national accounts GVA is output minus intermediate consumption;[1] it is a balancing item of the national accounts' production account.[2]

Relationship to gross domestic product[edit]

GVA is linked as a measurement to gross domestic product (gdp), as both are measures of output. The relationship is defined as:

GVA + taxes on products - subsidies on products = GDP

As the total aggregates of taxes on products and subsidies on products are only available at whole economy level,[3] Gross value added is used for measuring gross regional domestic product and other measures of the output of entities smaller than a whole economy. Restated,

GVA = GDP + subsidies - (direct, sales) taxes

Over-simplistically, GVA is the grand total of all revenues, from final sales and (net) subsidies, which are incomes into businesses. Those incomes are then used to cover expenses (wages & salaries, dividends), savings (profits, depreciation), and (indirect) taxes.

GVA is sector specific, and GDP is calculated by summation of GVA of all sectors of economy with taxes added and subsidies are deducted.

Disadvantages of GVA[edit]

Comparison over time is difficult.

Advantages of GVA[edit]

  • Better coverage.
  • Internationally comparable figure.
  • Better market condition projection globally, especially in case of FIIs.

See also[edit]

References[edit]

  1. ^ "Statistics Explained".
  2. ^ "Statistics Explained".
  3. ^ "Guide to Gross Value Added (GVA)". Office for National Statistics. 2002-11-15. Retrieved 2012-07-08.