Production boundary

The production boundary included in national accounts is essential for defining the coverage of the accounting system.

Production is an activity carried out under the control and responsibility of an institutional unit that uses inputs of labour, capital and goods and services to produce goods and services. Production does not cover purely natural processes without any human involvement or direction, like the unmanaged growth of fish stocks in international waters (but fish farming is production).

Production includes:

a) the production of all individual or collective goods or services that are supplied to units other than their producers (or intended to be so supplied);
b) the own-account production of all goods that are retained by their producers for their own final consumption or gross fixed capital formation. Own account production for gross fixed capital formation includes the production of fixed assets such as construction, research and development activities, the development of software and mineral exploration for own gross fixed capital formation.

Own-account production of goods by households pertains in general to:
(1) own-account construction of dwellings;
(2) the production and storage of agricultural products;
(3) the processing of agricultural products, like the production of flour by milling, the preservation of fruit by drying and bottling; the production of dairy products like butter and cheese and the production of beer, wine and spirits;
(4) the production of other primary products, like mining salt, cutting peat and carrying water;
(5) other kinds of processing, like weaving cloth, the production of pottery and making furniture.

Own-account production of a good by households should be recorded if this type of production is significant, i.e. if it is believed to be quantitatively important in relation to the total supply of that good in a country.

By convention, in the ESA, only own-account construction of dwellings and the production, storage and processing of agricultural products is included; all other own-account production of goods by households are deemed to be insignificant for EU countries.

c) the own-account production of housing services by owner-occupiers;
d) domestic and personal services produced by employing paid domestic staff;
e) volunteer activities that result in goods, e.g. the construction of a dwelling, church or other building are to be recorded as production. Volunteer activities that do not result in goods, e.g. caretaking and cleaning without payment, are excluded.

All such activities are included even if they are illegal or not-registered at tax, social security, statistical and other public authorities.

Production excludes the production of domestic and personal services that are produced and consumed within the same household (with the exception of employing paid domestic staff and the services of owner-occupied dwellings). Cases in point are:
a) cleaning, decoration and maintenance of the dwelling as far as these activities are also common for tenants;
b) cleaning, servicing and repair of household durables;
c) preparation and serving of meals;
d) care, training and instruction of children;
e) care of sick, infirm or old people;
f) transportation of members of the household or their goods.