8.5 In national accounting, goods and services are usually valued using the prices buyers pay for them. Most government production, however, is not sold but is delivered without charge and consumed either individually by Canadians—education or health care, for instance—or collectively by all Canadians, like military defence or the administration of justice. The absence of market transactions and selling prices for most government-produced goods and services creates difficulties for national accountants, in Canada and around the world, in estimating the value of this production. The method adopted as the international national accounting standard is to assume that the value of the goods and services produced by government is equal to the cost of producing those goods and services. That is to say, the value of government-produced goods and services is equal to government current expenditure on goods and services.
8.6 Government current expenditure on goods and services1 appearing in the IEA as a component of expenditure- based GDP does not include the value of those goods and services produced by government that are sold to other institutional sectors. The value of these sales is netted from total purchases of goods and services by government, to estimate the value of government final consumption—Canadian society's final consumption of government goods and services.
8.7 Government goods and services purchased by the household sector are recorded in the IEA as personal expenditure on consumer goods and services and those purchased by non-residents of Canada are part of exports of goods and services. Goods and services purchased by business from government are part of the intermediate inputs of business in the production of the goods and services produced by that sector.
8.8 Government current expenditure on goods and services appearing in government outlay in the IEA sector accounts has not been reduced by the value of sales to other institutional sectors because those sales are shown as a component of government income in those sector accounts.
Who is included in the government institutional sector?
8.9 In the Canadian System of National Accounts, the government institutional sector is divided into the following basic components called sub-sectors:2
- federal government;
- provincial and territorial government;
- local government; and
- Canada and Quebec pension plans.
8.10 The sub-sectoring of the CSNA's government institutional sector and the components of each sub-sector for calculation of current expenditure on goods and services is illustrated in Table 8.2.
8.11 The government sector of the Canadian System of National Accounts is one part of a larger group of entities called the public sector universe. The other component of the public sector universe is called government business enterprises (GBE) which, in the CSNA, is classified to the corporate sector. The primary distinction between government controlled institutional units assigned to government and those assigned to government business enterprises is the nature of their principal activity. Non-commercial institutional units, controlled by government, are classified to the government institutional sector, while government controlled commercial entities are classified to the GBE component. An institutional unit is considered to be commercial, and therefore a GBE, if it operates in the marketplace, charging economically significant prices for its products.3 In the measurement of government current expenditure on goods and services, GBEs are not included.
1. In the System of National Accounts 1993 (SNA 1993), the government current expenditure on goods and services is named government final consumption expenditure. The definition in this section is derived from paragraph 9.94b of SNA 1993. The examples for individual and collective consumption were added to the SNA 1993 definition.
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