Satellite Accounts - General

The internationally agreed guidelines for national economic accounts, System of National Accounts 2008 (hereafter referred to as SNA 2008) (United Nations Statistics Division 2008), explicitly recommend that illegal market activity should be included in the measured economy. This recommendation has not yet been implemented by the U.S. Bureau of Economic Analysis (BEA) because of challenges inherent in identifying suitable source data and differences in conceptual traditions. This paper explores how tracking illegal activity in the U.S. national economic accounts might impact nominal Gross Domestic Product (GDP), real GDP, productivity, and other economic statistics. Nominal GDP rises in 2017 by more than 1 percent when illegal activity is tracked in the U.S. National Income and Product Accounts (NIPAs). By category, illegal drugs add $108 billion to measured nominal GDP in 2017, illegal prostitution adds $10 billion, illegal gambling adds $4 billion, and theft from businesses adds $109 billion. Real GDP and productivity growth also change. Real illegal output grew faster than overall GDP during the 1970s and post–2008. As a result, tracking illegal activity ameliorates both the 1970s economic slowdown and the post–2008 economic slowdown considerably.

Brick and mortar retailers spent $484 billion providing “free” shopping experiences in 2016. For example, vehicle dealerships provide “free” test drives, book stores provide “free” book signings and grocery stores provide “free” food samples. To capture the value of “free” shopping experiences, the paper models them as an implicit barter transaction of shopping experiences for sales attention. The paper then modifies previously created productivity accounts for the wholesale and retail sector (Jorgenson, Ho and Samuels 2016) to include shopping experiences as a new industry output and sales attention as a new industry input.

Despite the rise of e-commerce, “free” brick and mortar shopping experiences grew faster than overall retail margins after 2002. Furthermore, brick and mortar stores have dramatically increased service speed since 2002. Between 2002 and 2014, better shopping experiences contributed $110 billion to real industry output growth and faster service speed subtracted $78 billion from real industry input growth. Furthermore, slower service speed between 1947 and 2002 increases real industry input growth and decreases productivity growth for that time period. Combining all these modifications together, the post-2002 wholesale and retail productivity slowdown shrinks from 0.98 percentage points per year to only 0.08 percentage points per year.