IX. THE USE OF INCOME ACCOUNT
G. Actual final consumption of general government (P.4)
| 9.90. | As noted above, all the services provided by NPISHs are treated as individual even though some are partly collective in nature. All the goods and services covered by the final expenditures of NPISHs are, therefore, assumed to be provided to individual households as social transfers in kind. It follows that NPISHs have no actual final consumption, so that their adjusted disposable income is equal to their saving. |
| 9.91. | The value of the actual final consumption of government units is taken to be equal to the value of the expenditures they incur on collective services. Although collective services benefit the community, or certain sections of the community, rather than the government, the actual consumption of these services cannot be distributed among individual households, or even among groups of households such as sub-sectors of the household sector. It is therefore attributed to the same government units that incur the corresponding expenditures. As government final consumption expenditure must be either individual or collective, the value of the actual final consumption of general government is equal to the value of its total final consumption expenditure less its expenditure on individual goods or services provided as social transfers in kind to households. |
| 9.92. | The identification and measurement of government actualfinal consumption serves two main analytical or policy purposes:
(a) Collective services can be identified with "public goods" as defined in public finance and economic theory. While it may be technically possible to charge individual consumers of certain collective services according to their usage or benefits they derive, the transactions costs of so doing would be prohibitively high, leading to market failure. This provides an economic, rather than political, rationale for government involvement as the provision of such services has to be financed collectively out of taxation or other government revenues;
(b) Collective services do not provide a mechanism for redistributing resources among individual households. As redistribution may be one of the main economic objectives of government policy, it is useful to separate the collective services which do not serve this purpose from the individual goods and services which are ultimately channelled to individual households, even though paid for by government. |
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