Transcript Uses of National Income Data

Uses of National
Income Data
A2 Economics
Aims and Objectives
Aim:
• Understand uses of national income data.
Objectives:
• Assess problems with using GDP as a measure of living standards
• Define HDI, HPI, MDP & MI
• Explain how these measures measure standards of living and welfare
• Analyse HDI internationally
• Evaluate the economics of happiness
GDP, GNP & NI – Poor Measures of Living
Standards
GDP
• Value of output produced by resources in the UK
GNP
• Output produced by resources within the UK, plus net property
income (interests, profits, dividends flowing in minus property flowing
out) from abroad.
NI
• Output produced by resources in the UK, plus net property income
from abroad, minus depreciation from the UK’s capital equipment.
Economic growth may
lead to negative
externalities which
affect living standards.
GDP over estimates
living standards.
Negative
externalities
GDP
incompletely
measures
output
Reasons
Poor
Measure
Excludes non-monetised
sector, such as unpaid labour
which contributes to GDP
Distribution
of income
GDP per capita can rise,
yet the distribution of
income can become
more unequal.
Ignores the effect growth has
on leisure and welfare,
therefore difficult to assess if
there has been significant
changes in living standards.
Ignores
value of
leisure
Alternative Measures of Standards of Living
• Human Development Index
• Human Poverty Index
• Measure of Domestic Progress
• Misery Index
Human Development Index (HDI)
• A measure of economic welfare based on three indicators – standard
of living, life expectancy and educational attainment.
• The maximum value of HDI is 1.
• The closer a country’s HDI is to 1 the greater its’ human development
in terms of these three indicators.
• Data
• http://hdr.undp.org/en/statistics/
HDI
Rank
Country
Life Expectancy 2011
Education Index
2011
GDP Per Capita PPP$ Terms
2009
HDI Value 2011
Top 10
1
Norway
81.1
0.985
47,676
0.943
2
Australia
81.9
0.981
34,259
0.929
3
Netherlands
80.7
0.931
36,358
0.91
4
United States
78.5
0.939
41,761
0.91
5
New Zealand
80.7
1
24,706
0.908
6
Canada
81
0.927
34,567
0.908
7
Ireland
80.6
0.963
36,278
0.908
8
Liechtenstein
79.6
0.818
..
0.905
9
Germany
80.4
0.928
32,255
0.905
10
Sweden
81.4
0.904
32,314
0.904
28
UK
80.2
0.815
32,147
0.863
Bottom 5
183
Chad
49.6
0.219
1,181
0.328
184
Mozambique
50.2
0.222
804
0.322
185
Burundi
50.4
0.353
356
0.316
186
Niger
54.7
0.177
626
0.295
187
Congo
48.4
0.356
290
0.286
Human Poverty Index (HPI)
• A measure of economic welfare based on four basic dimensions of
human life: longevity, knowledge, economic provisioning and social
inclusion.
• % of people likely to die before the age of 60
• % of people whose ability to read and write is far from adequate
• proportion of the population with disposable incomes of less than
50% of the medium
• proportion of long term unemployed (12 months of more)
Human Poverty Index & UK
• More than 100 million people are relatively poor within all of the
twenty-four OECD countries
• In the UK, 13.5% of the population have an income below the
income-poverty threshold of 50% of average income
• 21.8% of the population in this country are said to be "functionally
illiterate" - unable to read many basic instructions on medicine
bottles or read stories to their children
• The UK ranked 14th (out of 17) for long-term unemployment
• Sweden has the lowest overall incidence of human poverty
followed by the Netherlands and Germany. The worst country is the
USA followed by Ireland and the UK
The Misery Index (MI)
• A measure of economic welfare constructed by adding the
unemployment rate to the inflation rate on the assumption that a high
inflation and unemployment rate means a higher level of economic
and social costs for a country.
• Guardian Article
Measure of Domestic
Progress (MDP)
• A measure of economic welfare
designed to reflect progress in
quality of life and progress
towards a sustainable economy
by factoring in the social and
environmental costs of growth,
and benefits of unpaid work such
as volunteer work and house
work.
• Essentially is the ‘Economics of
Happiness’
• Article
Measures of Standard of Living and
Economic Welfare
• Having discussed and analysed the different measures of economic
welfare and standards of living, which do you feel is the most
accurate?
• What do you feel are the limitations of these measures?
– HDI
– HPI
– MI
– MDP