Friday, 5 November 2010

Anglesey and GVA - Part II

The following is an edited version of a briefing note from VONNE. To see complete document please follow this link: VONNE

Gross Value Added (GVA) is important measure in the estimation of Gross Domestic Product (GDP) and is the preferred measure of Government in assessing the overall economic well-being of an area. Both GVA and GDP are measures of output, however GDP is a key indicator of the state of the whole economy. To estimate GDP there are theoretical approaches of ‘production’. ‘income’ and ‘expenditure’. When using the production or income approaches, the contribution to the economy of each industry or sector is measured using GVA.

There is though known problems with the GVA measure. To get an accurate reflection of the GVA of a geographic area (sometimes referred to as GVA per head) you have to understand where each resident works, as assigning GVA to specific areas is often more complicated, and less reliable, by commuting. Hence areas of high workplace numbers (town and city centres) will show disproportionately high GVA, despite having a potentially small residential population. Conversely, high residential areas will have low GVA compared to the resident population numbers. This therefore creates difficulties in comparing areas and is why, when GVA per head is used, it is often accompanied with a note warning the effects of commuting can distort the figures supplied.

However, although GVA has a number of weaknesses, its calculations is fairly straightforward, it is based on information readily available, and it remains the dominant measure of economic activity globally.

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