Frequently Asked Questions
Guidelines for Citing BEA Information | ID: 484 | Created: Mar-27-2008
In national economic accounting, GDP and GDI are conceptually equal. GDP measures overall economic activity by final expenditures, and GDI measures it by the incomes generated from producing GDP. In practice, GDP and GDI differ because they are constructed using different sources of information. The different source data produce different results for a number of reasons, including sampling errors, coverage differences, and timing differences with respect to when expenditures and incomes are recorded. The overall difference between GDP and GDI is known as the statistical discrepancy; for an in-depth discussion of the statistical discrepancy see: http://www.bea.gov/papers/pdf/statdiscrepancy5_Grimm.pdf'
BEA features the final expenditures GDP estimate, in part, because of the more timely source data used to estimate quarterly GDP. In addition, early income estimates of quarterly corporate profits, bonuses, stock options, and other incomes may reflect income earned over the course of the year, but recorded only in the quarter when it is paid.
Over time, however, GDI and GDP provide a similar overall picture of economic activity. The correlation between the rates of change for the final current quarterly estimates of GDP and GDI is 0.82. The correlation between earlier vintage estimates of these two measures is lower, but still high. Also, when one looks at annual data – where the timing differences are less important, the correlation between GDP and GDI is 0.97.
Finally, the early GDI estimates provide little information on what the later (revised) GDP estimates will be, and there is no statistically significant predictive value to the early GDI estimates (see BEA WP2003-01 “Revisions, Rationality and Turning Points in GDP’ which that can be found at: http://www.bea.gov/papers/pdf/RevRationality-abs.pdf).
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