Exact explanation of value added vs output

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    IMPLAN Support
    Hi Nperry. In regards to your question about the difference between total output and value-added, here is the simplest explanation of each terms. Total Output (TO) represents the gross value of all financial transactions that occur in a region over a specified period and is often reported by industry. Total Value-Added (TVA) differs from total output in that it represents the value of final goods and services and is the proportion of total revenue (output) that is paid to the factors of production in the form of employee compensation, proprietor income, taxes on production, and profits that is associated with an activity, business, or program. TVA represents the contribution to the region’s Gross Regional Product (GRP). We hope this helps in explaining the difference between the two terms. I apologize for the broken link regarding working with Events. I however have included some articles that discuss [url=http://www.implan.com/index.php?option=com_content&view=article&id=827:building-the-model-wiki&catid=222:KB5]how to build your first model[/url], how to set up your [url=http://www.implan.com/index.php?option=com_content&view=article&id=859:events-wiki&catid=191:reference-manual]events [/url]and [url=http://www.implan.com/index.php?option=com_content&view=article&id=858:activities-wiki&catid=191:reference-manual]Activities[/url]. Thanks!
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    nperry
    Thank you for your explanation. I am new to this program so I appreciate you answering simple questions for me. It seems to me that the TVA most accurately represents the total contribution to a local economy from an event. Certainly that is what any Macro textbook would say, they would say the total output measure is double counting. Yet, reading through so many reports, I see most economic impact reports using the total output number as their primary measure of economic activity. I can see the argument for using it conceptually (obviously many probably use it because its higher, but I need a real reason too...), since from a business perspective they do not see total value added, they only see total output, and technically speaking it is the measure of the total economic activity. Can you tell me what you see most people do, and can you provide me with a reason that I might use the total output number over the total value added? I would appreciate any insight you can offer, I need to choose which number to go with as my official number.
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    IMPLAN Support
    Hello nperry, Really it is analyst choice. People do have strong opinions and argue both sides of this issue. If you are doing a report that will be compared to other reports for other like companies and they are using Output as their indicator, to be comparable, you would want to use Output so that the audience of your study is comparing 'apples to apples'. Since Total Value Added will always, as you noted, be lower than Output, you are likely to get strong push back if you study is being compared to others that use Output as their major indicator. Since Output = Intermediate Expenditures + Value Added, that argument that the Intermediate Expenditures is double-counted can certainly be argued as valid and if you are more comfortable describing your impacts in regards to GRP, than that is also a valid option, and likewise, if you are being compared to other studies using Value Added to be truly comparable you would want to use the same indicators, thus avoiding skewing perceptions. If your study won't be compared to others, it sounds like you are more comfortable with reporting Value Added, which is fine as long as your audience is comfortable with the concept of GRP and the fact that this is not the same as the "sales" value. Let us know if you have any further questions.
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