GDP PER CAPITA
GDP per capita definition
is a measure of the total output of a country that takes into account GDP and divides it by the number of people in the country
strength of GDP per capita
the rules for the measurement of gdp are universally agreed and virtually all countries compile GDP statistics
weaknesses of GDP per capita as a measurement of welfarw
when comparing GDP per capita it also depends on the exchange rate for example since 2007 the pound has depreciated against the US dollar which effects GDP per capita when converting it. Additionally smaller countries tend to have a higher gdp per capita due to the fact larger countries are averaging more people.
weaknesses of GDP per capita as a measure of welfare
EMITS NON MARKET ACTIIVITES 2. household and domestic production is emitted e.g. childcare: if a parent stays at home to look after a child, it is excluded from GDP. If a person is paid to look after a child, it is included. This can make a big difference over time: e.g. UK big increase in female participation. (differs internationally e.g. 1999 Spain 40% UK 73%)
weaknesses of GDP per capita as a measure of welfare
EMITS NON MARKET ACTIVITES 1. doesn't include leisure time - not paid therefore not included working hours/holidays differ between countries which can effect welfare e.g: public holidays in england/wales are 8 whereas germany its 9-13. hours worked differs between OECD countries- e.g. US have much longer working hours than those in europe which could suggest less welfare, however there is the issue- is it better to work longer hours in a country with higher GDP (japan)/work fewer hours - lower GDP (germany) - trade off
weaknesses of GDP per capita as a measure of welfare
EMTITS NO MARKET ACTIVITIES 3. doesn't include anything reflecting the hidden economy- illegal transactions such as recreational drugs or transactions hidden from the tax system (for example starbucks, google and amazon) - these activities result in a lot of market activities not being included in GDP at all. also doesn't take into account regrettable necessities (things you need but would like to do without) for example in hotter climates it requires expenditure on air-con which isn't necessary in more temperate climates also doesn't include negative externalities such as crime/pollution/culture - can have a big impact on welfare
strength of GDP per capita
although not every item that reflects human welfare is included in GDP a sustained rise in GDP is generally agreed to be a necessary condition for a sustained rise in welfare
strength of GDP per capita
close correlation between level of per capita GDP and other indicators such as mortality rates, literacy rates etc.
strength of GDP per capita
includes consumption possibilities and consumption is considered a good indicator of welfare
strength of GDP per capita
its a single measure and therefore can make simple comparisons between countries
difference between real gdp/nominal
nominal per capita gdp for a particular year/quarter is the monetary value of output using current prices (will change due to inflation) real gdp per capita takes into account inflation - adjusts it by constructing a price index (which measures how much a unit of money can buy) different types PPI/CPI and GDP deflator. PPI/CPI focuses on a fixed basket of consumer goods/services whereas the GDP deflator shows the change in prices of a varied basket.
