Gross Value Added (GVA) Definition, Examples & Analysis | Economics
Gross Value Added, known by its acronym GVA, is a macroeconomic magnitude that measures the total value created by a sector, country or region. That is, the value of the set of goods and services that are produced in a country during a period of time, discounting indirect taxes and intermediate consumption.
For example, if I produce a loaf of bread, I am interested in knowing the value of the loaf of bread and not the value of the seeds to produce wheat, the wheat to produce flour, or the flour to produce bread. With this magnitude, we avoid duplications. In conclusion, gross value added (GVA) is the final value of production (output) minus the value of what we have used to produce (inputs).
Relationship Between GDP and GVA
- GDP – Gross Domestic Product
- GVA – Gross Value Added
Dofference Between Gross Domestic Product and Gross Value Added
The Gross Domestic Product (GDP) is nothing more than the monetary value of all final goods and services produced by a country in a given period of time while GVA is only the value created by removing intermediate consumption, GDP is total value.
The relationship between the GDP and GVA is such that:
GDP = GVA – net indirect taxes
Gross Value Added (GVA) Sectoral Analysis
To analyze the GVA by sectors, we are going to use the example of the different sectors in Spain. All data on gross added value given below are annual variation rates (TAV).
The GVA of agriculture is characterized by acyclical behavior. It has a low correlation with the total sector and is considerably more volatile.
The GVA of industry has been characterized by weak growth compared to the other sectors during the expansionary phase (until 2007) and by a fairly strong contraction as a result of the outbreak of the crisis. Its behavior is cyclical, but more volatile than the economy as a whole.
The gross value added of construction is characterized by a great growth during the expansionary phase and a great fall after the moment in which the real estate bubble explodes. It behaves cyclically and in recent years more volatile than the economy as a whole.
Lastly, the GVA of services has a high correlation with the GVA of the economy as a whole. Among other things, due to the decisive weight of services in Spain. Thus, greater growth is observed in the expansionary phase and less dynamism in the crisis.