Does Higher Gdp Necessarily Cause a Higher Standard of Living.

Does Higher Gdp Necessarily Cause a Higher Standard of Living.

GDP per capita is often used as an indicator of standard of living in an economy. While this approach has his advantages, it has its disadvantages as an indicator of standard of living.

The advantages of using GDP per capita as an indicator of standard of living are that it is measured frequently, widely and consistently. Most countries provide information on GDP on a quartely basis which allows one to spot trends quickly. GDP is available for practically every country in the world and so allowing an easy comparison between the standard of living between countries. The definition of GDP is almost the same in every country and so it is almost, in all cases, the same thing that is being measured.

The disadvantage, is that GDP is not specifically a measure of the standard of living. It is only a measure of particular types of economic activity within a country. This is clearly shown in this example showing an extreme case. If a country exported 100% of its production, it would still have a high GDP, but a very poor standard of living.
National GDP figures hide significant regional variations in output, employment and incoes per head of te population. GDP figures on their own do not show the distribution of inceome and the uneven spread of financial wealth. Incomes and earning may be very unequally distributed among the population.

If all other things are equal within a country, the standard of liviing tends to increase when GDP per capita increases. GDP is a proxy for standard of living, rather than a direct measure of it.

Similar Essays