What is gross value added?

When we talk about gross added value we refer to a macroeconomic magnitude to measure the total value that has been created in a given country or territory. The value created is measured according to goods and services that companies in that country have been able to produce during a specific period of time, and discounting indirect taxes and intermediate consumption.

When trying to measure Gross Value Added (GVA), the difference between the value of production (output) and the value of the assets or resources that we have used to produce them (inputs) is used. These can be labor, machinery, facilities, etc ...

Perhaps the concept is familiar to you, because it is very similar to the concept of Gross Domestic Product (GDP), although it is not quite the same. GDP is the monetary value of goods and services that have been produced in a country or territory in a specific period of time (which is usually 1 year). On the other hand, the VAB only takes into account the value created, removing the intermediate consumption that has been used.

In the case of GDP, this intermediate value is taken into account, resulting in a total value. The relationship that exists between both concepts is, therefore, related in the following way:

GDP = GVA + net indirect taxes

We also have to bear in mind that the Gross Value Added of services is one of the most important in the economy. This is because the services sector in Spain is very active and the one that generates the most value (we are a country of services, practically). For this reason, we indicate that the total GVA (or the economy as a whole) is highly correlated with the GVA of the services sector.

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