Wednesday, March 19, 2008

Measuring Growth...

When we talk about economic growth, we commonly focus on GDP. Implicitly, we think of an economy with rapid GDP growth as doing well, and one with only slow GDP growth is doing poorly. We do so because we associate rapid GDP growth as implying that living standards are improving.

But in a world in which some countries have rapid population growth (India and Brazil), others have very slow population growth (China, Europe) and others have falling populations (Japan, Russia), this may be a poor way of viewing the world. Once we adjust for population growth rates, by focusing on per capita GDP growth, India, Brazil, and Australia look a lot less impressive, while tardy Japan is actually doing just fine. See this link for more.

1 comment:

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