Gross domestic product (GDP) is a comprehensive measure of the nation’s production. In order to be comprehensive, it must include some goods and services that are not traded in the market place. Those components of the GDP are called imputations. Examples include the services of owner-occupied housing, financial services provided without charge, and the treatment of employer-provided health insurance.

Imputations approximate the price and quantity that would be obtained for a good or service if it was traded in the market place. The largest imputation in the GDP accounts is that made to approximate the value of the services provided by owner-occupied housing. That imputation is made so that the treatment of owner-occupied housing in the GDP is comparable to that of tenant-occupied housing, which is valued by rent paid. That practice keeps GDP invariant as to whether a house is owner-occupied or rented. In the GDP, the purchase of a new house is treated as an investment; the ownership of the home is treated as a productive activity; and a service is assumed to flow from the house to the occupant over the economic life of the house. For the homeowner, the value of that service is measured as the income the homeowner could have received if the house had been rented to a tenant.

Another important imputation measures financial services provided by banks and other financial institutions either without charge or for a small fee that does not reflect the entire value of the service. Examples are checking-account maintenance and services provided to borrowers. For the depositor, this “imputed interest” is measured as the difference between the interest paid by the bank and the interest that the depositor could have earned by investing in “safe” government securities. For the borrower, it is measured as the difference between the interest charged by the bank and the interest the bank could have earned by investing in those government securities.

In addition to imputations for nonmarket transactions, the GDP accounts redirect certain transactions so that the consumption is attributed to the ultimate recipient of the good or service rather than to the payer. An important example is health care, which is generally paid for by private health insurance (often provided by the employer), by government insurance plans such as Medicare and Medicaid, or by consumer out-of-pocket payments for deductibles, copayments, and uninsured expenses. In the GDP, these health-care transactions are redirected so that they are included in personal consumption expenditures, reflecting the role of households as the final consumers of those health goods and services.

Since the mid-1990s, the shares of GDP accounted for by some imputations have increased as the activities measured have grown faster than other activities.

  • From 1996 to 2006, the share of GDP accounted for by the imputation for owner-occupied housing increased from 6.0 percent to 6.2 percent.
  • From 1996 to 2006, the share of employer contributions for private health and life insurance grew from 3.2 percent of GDP to 4.2 percent of GDP.
  • From 1996 to 2006, the share of all imputations in GDP grew from 13.8 percent to 14.8 percent.
  • In 2006, imputed financial services represented 1.7 percent of GDP, the same as in 1996.

Without imputations, the GDP story is incomplete and can be misleading. For example, from 1998 to 2006, personal consumption expenditures for medical-care services, which are largely funded by government or employer-provided health insurance, grew from 10.5 percent to 12.0 percent of GDP, while the share of people engaged in production in the private health care and social assistance industry (that is, full-time equivalent employment plus the number of self-employed) grew from 9.4 percent to 10.8 percent of total employment. If there had been no imputations or redirections showing the growth coming from government and employment-provided health insurance, the growth in GDP for health services would not have been correctly aligned with the growth in employment.

For a detailed accounting of GDP imputations, see Table 7.12.