Gross Domestic Product

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Gross domestic product GDP

Gross domestic product (GDP) is the standard measure of the value of the goods and services produced by a country during a period. Per capita GDP is a broad indicator of economic living standards.

Each country calculates GDP in its own currency. In order to compare countries, these estimates have to be converted into a common currency. Often, the conversion is made using exchange rates, but these give a misleading comparison of the volumes of goods and services in GDP. Therefore comparisons of GDP between countries are best made using Purchasing power parity (PPPs) to convert each country's GDP into a common currency. PPPs are currency converters that equalise the purchasing power of the different currencies (see also Rates of conversion).

 

Definition

What does gross domestic product mean? "Gross" signifies that no deduction has been made for the depreciation of machinery, buildings and other capital products used in production. "Domestic" means that it is production by the resident institutional units of the country. As many products are used to produce other products it is necessary to define production in terms of value added.

GDP can be measured in three different ways: as output less intermediate consumption (i.e. value added) plus taxes less subsidies on products (such as VAT); as the income earned from production by summing employee compensation, the gross operating surplus of enterprises and government, the gross mixed income of unincorporated enterprises and net taxes on production and imports (VAT, payroll tax, import duties, etc., less subsidies); or as the expenditure on the goods and services produced by summing final consumption expenditures, gross fixed capital formation, changes in inventories and exports less imports.

 

Comparability

All OECD countries follow the 1993 System of National Accounts. However, since Luxembourg and, to a lesser extent, Switzerland have a relatively large number of frontier workers, their GDP per capita is, to some extent, overstated compared with other countries. Such workers contribute to GDP but are excluded from the population figures.

For some countries, the latest year has been estimated by the Secretariat. For several countries, the historical data have also been estimated by the OECD; if countries revise their methodologies but only supply revised data for recent years, the historical data have been estimated by mechanically linking the new and old series.

Note that for Australia and New Zealand data refer to fiscal year.

 

Long-term trends

In terms of total GDP, the United States is, by far, the largest member country. Japan is the second largest Economy followed, at some distance, by the four large EU members - Germany, United Kingdom, France and Italy. The next four are Mexico, Spain, Canada and Korea. These rankings have not changed significantly over the period shown.

Per capita GDP for the OECD as a whole was 32 700 US dollars per head in 2007. Four OECD countries had per capita GDP in excess of 45 000 US dollars - Luxembourg, Norway, United States and Ireland. About half of the 30 OECD members had per capita GDP between 30 000 and 45 000 US dollars, while 10 countries had per capita GDP below 30 000 US dollars. Turkey, Mexico and Poland had the lowest per capita GDP. Note that both GDP and PPPs contain statistical errors, and differences between countries in per capita GDP of 5% or less are not significant.

 

 

References

OECD (2008), National Accounts of OECD Countries, OECD, Paris.

Analytical publications

OECD (2003), The Sources of Economic Growth in OECD Countries, OECD, Paris.

OECD (2008), OECD Economic Outlook, June No. 83 - Vol. 2008/1, OECD, Paris

Statistical publications

Maddison, Angus (2003), The World Economy: Historical Perspectives, OECD, Paris, also available on CD-ROM

OECD, African Development Bank (2008), African Economic Outlook 2007/2008, OECD, Paris, also available on CD-ROM

OECD (2008), OECD Latin American Economic Outlook 2009, OECD, Paris, also available on CD-ROM

Methodological publications

See Also

 

Further Reading

  • The World Economy Tables showing trends in world GDP. Some tables are 1950 to current, some are 0 AD to current.

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