Frequently Asked Questions
Guidelines for Citing BEA Information | ID: 1034 | Created: Apr-22-2014
Gross domestic product (or value added) by industry and gross output by industry are both published as part of BEA's Industry Economic Accounts, and both sets of statistics provide important insights into an industry’s contribution to the overall economy.
Gross output is the total value of goods and services produced by an industry. Intermediate inputs are the foreign and domestically-produced goods and services used up by an industry in the process of producing its gross output. Value added is the difference between gross output and intermediate inputs and represents the value of labor and capital used in producing gross output. The sum of value added across all industries is equal to gross domestic product for the economy.
A simple example illustrates how these different concepts are related. A baker buys water, eggs, and flour which he uses to make bread. The baker sells some of the bread to households and some to a deli. In addition to bread, the deli owner buys meat and cheese which she uses to make sandwiches which are all sold to households. In this case, the baker's gross output is the revenue earned from bread sales. Similarly, the deli’s gross output is the revenue earned from sandwich sales. Intermediate inputs are calculated as the cost of water, eggs, and flour for the baker, and the cost of bread, meat, and cheese for the deli owner. Value added for both is calculated as the difference between revenue earned and the cost of intermediate inputs.
Because gross output includes sales to other industries, it can be duplicative in nature. In the example above, total gross output double counts the value of bread used to make deli sandwiches by including it both in the output of the baker and embedded in the value of the sandwich sold by the deli. By contrast, an industry’s value added is defined as the total value of an industry's production less the cost of inputs purchased from other industries and eliminates this duplication. In the above example, the cost of the bread (and other inputs) is subtracted from the deli owner’s revenue when calculating value added.
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