HOME

TheInfoList



In
economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services. ...
, gross value added (GVA) is the measure of the value of
goods In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods ...

goods
and
services Service may refer to: Activities :''(See the Religion section for religious activities)'' * Administrative service, a required part of the workload of Faculty (academic staff), university faculty * Civil service, the body of employees of a governm ...
produced in an area, industry or sector of an
economy An economy (; ) is an area of the Production (economics), production, Distribution (economics), distribution and trade, as well as Consumption (economics), consumption of Goods (economics), goods and Service (economics), services by different a ...
. "Gross value added is the value of output minus the value of intermediate consumption; it is a measure of the contribution to GDP made by an individual producer, industry or sector; gross value added is the source from which the primary incomes of the SNA are generated and is therefore carried forward into the primary distribution of income account."


Relationship to gross domestic product

GVA is a very important measure, because it is used to determine
gross domestic product Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced in a specific time period. List of countries by GDP (nominal) per capita, GDP (nominal) per capita does not, however, reflect ...
(GDP). GDP is an indicator of the health of a national economy and economic growth. It represents the monetary value of all products and services produced in the country within a defined period of time. "In comparing GVA and GDP, we can say that GVA is a better measure for the economic welfare of the population, because it includes all primary incomes. From the point of view of the society as a whole GDP, despite its disadvantages, is probably a better measure for economic growth and welfare, because it includes also NET INDIRECT TAX (indirect taxes minus subsidies) which are the financial basis for the collective consumption of the society." The relationship between GVA and GDP is defined as: :GVA= GDP + subsidies on products – taxes on products As the total aggregates of taxes on products and subsidies on products are only available at whole economy level, Gross
value added In business, the difference between the sale price and the production cost of a product is the unit profit (accounting), profit. In economics, the sum of the unit profit, the unit depreciation cost, and the unit labor cost is the unit value adde ...
is used for measuring
gross regional domestic product Gross regional domestic product (GRDP), gross domestic product of region (GDPR), or gross state product (GSP) is a statistic that measures the size of a region's economy An economy (from Greek language, Greek οίκος – "household" and ν ...
and other measures of the output of entities smaller than a whole economy. Restated, :GDP at factor cost = gross value added (GVA) at factor cost. :GDP at factor cost = value of the final goods and services produced within the domestic territory of a country during one year by all production units inclusive of depreciation. :GDP at market price = GDP at factor cost + net indirect taxes(indirect taxes- subsidies). :GVA at factor cost = value of output (quantity * price) - value of intermediary consumption.


GVA at different levels

GVA can be used for measuring of the contribution to GDP made by an individual producer, industry or sector. For instance, to analyze the productivity of the market sector, one can use GVA per worker or GVA per hour. The measure preferred by the Organisation for Economic Cooperation and Development (
OECD The Organisation for Economic Co-operation and Development (OECD; french: Organisation de Coopération et de Développement Économiques, OCDE) is an intergovernmental economic organisation with 38 member countries, founded in 1961 to sti ...

OECD
) in the Productivity Database is GVA per hour. At the company level, GVA refers to the
net income In business Business is the activity of making one's living or making money by producing or buying and selling Product (business), products (such as goods and services). Simply put, it is "any activity or enterprise entered into for profit. ...
of a produced particular good. "Once the consumption of fixed capital and the effects of depreciation are subtracted, the company knows how much net value a particular operation adds to its bottom line. In other words, the GVA number reveals the contribution made by that particular product to the company's profit."


Disadvantages of GVA

* Comparison over time is difficult.


Advantages of GVA

* Internationally comparable figure * Better market condition projection globally, especially in case of FIIs


Conclusion

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.


See also

*
Gross profit For households and individuals, gross income is the sum of all wages, salaries, profits, interest payments, rents, and other forms of earnings, before any deductions or taxes. It is opposed to net income, defined as the gross income minus taxes ...
*
Measures of national income and output A variety of measures of national income and output are used in economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distr ...


References

{{Authority control Gross domestic product National accounts