Value Added

The procedure for calculation of the value added of industry and services varies from country to country and over time for most countries. The latter is not only the consequence of a lack of data but also of territorial shifts. Most of these figures are given in percentages of GDP (at factor cost or market prices) and are often based on current prices. However, percentages based on current prices can not be used here, because GDP figures at constant prices are used in the IMAGE 2 model. For some countries, the value added of industry and services in percentages of GDP at current prices differ strongly from those at constant prices. This is the consequence of differences in the deflator of the value added of the sectors agriculture, industry and services. These differences in deflators result in large differences in estimating the share of value added of services and industry at constant prices vs. current prices. Data from the World Bank suggest that already in 1970 the value added of industry and services in percentages of GDP at current prices can not be used as indication for the value added at constant prices, and there is no reason to assume that data before 1970 will result in a better fit. Therefore, decided was to estimate value added data in 1990 constant prices. 

• Step 1: calculation of Value Added per sector in 1995 US$ for the period 1970 - 1995     

The value added of the aggregated sectors agriculture, industry and service together form the total GDP. For each country where data were available from the World Development Indicators (WDI, 1998) the value added of the three sectors in 1995 US$ were computed with the equation in Box 4.

As a consistency check the total amount of GDP per country was calculated as the sum of the three value added sectors (agriculture, industry and services, see Box 4). This should match the calculated total GDP directly from the WDI98 data (see above, Box 1). For countries were no or few data series were available the sector shares (in percentages) of value added as presented by WDI were used. Also, if few years were missing, the percentages were assumed to remain constant since the last known year. 
 
An exception is region of the Former USSR. WDI presents data for Latvia and Armenia for the period 1980 - 1995. For the period 1970 - 1984 the sector shares are assumed to follow the same trend as the Russian Federation (for which the WDI presents shares of sectors (in %) for the period 1980 - 1995). The same trend is applied to the republics Azerbijan, Belarus Kazakstan, Kyrgyzstan, Lithuania, Tajikistan, Ukraine and Uzbekistan, but then for the period 1970 - 1986. 

Box 4. Methodology for calculation Value Added (VA) per sector, per country , per year

VA_(1995 US$)_s,c,y = VA_con_s,r,y * VA_cur_s,r,1995  / VA_con _s,r,1995 / DEC 1995
where:  

• VA_(1995 US$)_s,c,y = VA (in constant 1987 LCU) for sector s, country c, year y 
• VA_cur _s,c,1995 = VA (in current LCU) for sector s, country c, in 1995 
• VA_con _s,c,1995 = VA (in constant 1987 LCU) for sector s, country c, in 1995 
• DEC 1995 = DEC alternative conversion factor (in LCU per US$), in 1995  
  
• Step 2: calculation of Value Added per sector in 1995 US$ for the period 1890 - 1970     

The historical data about value added are needed as input to the IMAGE 2.1 Energy-Economy model in order to compute energy consumption. For scenario analysis it is difficult to estimate future value added data. On the other hand, scenarios of GDP/cap can be derived from the literature. Therefore, in order to estimate historical value added data, a historical relationship between GDP/cap and value added as percentage of GDP is derived. 
 
Historic data on value added for Canada, USA and a number of OECD countries are obtained from the World Bank (1976, 1993), OECD (1972, 1975) and Kuznets (1971). This table gives an overview of the time period of which data has come available for the reference countries. This table demonstrates that only for a few countries sufficient data are available for studying the historical trend in the shares of the value added of industry and services. Data for non-OECD countries are even more scarce. For most reference countries data have come available for 1960-1990. Only for Argentina, Colombia, Peru, Morocco, India and South Korea some data are available from before 1960. 
 
The following steps are performed to compute sectoral historical value added per capita:

1. Calculate GDP/cap on basis of the 1970-1995 period (see above in section about GDP).
2. Plot the share of Value Added per sector against GDP/cap (1995 US$) for the period 1970 - 1995.
3. Determine a trendline for the shares agriculture and services through these points, share industry is computed as 1 - sh_agr - sh_ser.
4. Note that blue data points represent the period 1970 - 1995, and purple data points are from the pre-1970 period.
5. Use formula from step 3, to calculate pre-1970 shares per sector with historical GDP/cap data (see above in section about GDP).     

• Download table: Total value added of the three sectors 1890 - 1990 (xls, 162Kb)
• Go to: Figures of the total value added of the three sectors 1890 - 1990    

The regional value added per sector is the sum of the separate value added from all the countries within that region. The regional share of that sector is determined from that regional total.

References

• References