Economics Stack Exchange Archive
Better measurements than GDP?
- posted by: David on 2011-10-12
- tagged:
gdp - score: 10
GDP is so widely used to measure economic growth, even though is has a range of well-known problems. Specifically, there are issues with measuring the significant black-economy, not measuring self-sustaining households, etc.
Are there any available alternative measures that one can access or easily create that gives a clearer picture of economic growth?
Answer 100
- posted by: Turukawa on 2011-10-12
- score: 5
The Economist has a discussion on this relating to GDP per capita vs gross national income vs net national income (amongst others). In my own work I find that a range of these is necessary to get an idea:
- GDP per capita is useful only if wealth is widespread and well-reported; useless in Cameroon, for instance, where - outside of a narrow elite who pocket immense oil revenues - just about everyone is a subsistance farmer;
- GDP per capita for the top/bottom 10/20% is also useful as a measure that distribution and the potential spending power at each end of the market; if the data is good enough (rare) you may even be able to track growth in these disparate ends;
- Purchasing Power Parity versions of these are useful as well, but it really depends on what you're trying to evaluate (imported goods, for instance, aren't going to benefit from PPP);
The problem is that, outside of these narrow bands, few data are tracked sufficiently well to ensure robust analysis. The IMF publishes their World Economic Outlook twice annually which is a useful starting point (September release here). Here you can use imports / exports / balance of payments and level of debt as proxies.
In markets with little substantive data (especially in the African emerging markets) I like to fall back on the reported sales of prepay mobile phone cards as these are almost a parallel currency. This can give you a tremendous insight into the growth and scale of the shadow economy.
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