Appendix A: Derivation of Gross State Product (GSP)

In practice, GSP estimates are measured as the sum of distributions by industry of the components of gross domestic income. The components of gross domestic income include compensation to employees, indirect business tax and non-tax liability, and property-type income. For the 1997 GSP, the compensation of employees' component made up 39.6 percent of total GSP. The indirect business tax and non-tax liability component contributed 10.8 percent to total GSP, and the property-type income component contributed most to the total GSP at 49.7 percent.

Compensation to employees includes employee wages and salaries as well as supplements to wages and salaries such as employer contributions for social insurance and other labor income (i.e., employer contributions to private pension and profit-sharing plans). Indirect business tax and non-tax liabilities mainly include the sum of state and local non-personal property taxes, licenses, non-tax liabilities, and sales and gross receipt taxes. Federal non-tax liabilities and excise taxes on goods and services are also included.

Property-type income on the proprietor's side comprises income of unincorporated establishments, rental income of persons, proprietors inventory valuation adjustment, and non-corporate capital consumption allowance (CCA). On the corporate side, property-type income includes corporate profits before taxes, net interest, corporate inventory valuation adjustment, corporate CCA, business transfer payments, and subsidies. In short, the distributions by industry of the components of gross domestic income are the sums of costs incurred (such as compensation of employees, net interest and indirect business taxes) and the profits earned in production.

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