2.3 Actors in the national economy

For purposes of national accounting the national economy is defined on the basis of resident economic units. An economic unit is said to be resident to a country when it has a centre of economic interest on the economic territory of that country. In practice this means that 1) the unit takes part in the economic activity of this country for a longer period of time (one year or more) and 2) there is a location within the economic area where the unit engages in economic activities.

The concept of resident economic unit comprises both natural persons and institutions. Tourists and people travelling on business, for example, do not during their normal travels move out of their country of origin, but they are considered to remain in their home country, in other words they are counted in the domestic national accounts.

In ESA95, the basic unit of economic decision-making is called an institutional unit. Distinctive characteristics of these units include their uniformity of behaviour and autonomy in decision-making in respect of their principal functions. The institutional unit is so defined that it either a) has decision-making autonomy in respect of its principal function and keeps a complete set of accounts; or b) has decision-making autonomy in respect of its principal function and the possibility, from both an economic and legal viewpoint, to compile a complete set of accounts.

ESA95 sets out in some detail what is meant by a complete set of accounts and independent decision-making in respect of principal function. In order to be said to have decision-making autonomy in respect of principal function, an institutional unit must be able to own goods or assets, to incur liabilities on its own behalf and to take on commitments with another unit. ESA95 also specifies how to classify units that do not meet the criteria of an institutional unit. It is separately mentioned that "households always enjoy autonomy of decision in respect of their principal function and must therefore be institutional units, even though they do not keep a complete set of accounts" (ESA95 2.13).