Using national income data
Living standards and welfare are considered to be key concepts in economic development.
In a previous section we noted that using national income data
to measure living standards, and to measure how these change over time,
is very difficult.
Similarly, using national income data to compare the living standards in different countries can be problematic. In particular, governments have problems:
- measuring living standards of the population
- measuring how living standards change over time
- comparing living standards between different countries
Can you remember the issues associated with using national income data such as GDP to measure living standards?
- The unofficial, shadow or informal economy - in which the output is not declared.
- Non-marketed goods and services - some transactions do not involve money changing hands.
- Government spending -some government expenditure goes to producing public goods, for example defense, which are not sold.
Can you remember the issues associated with using national income data such as GDP to measure how living standards change over time?
- Population numbers change
- income flows to and from abroad change
- Prices change which gives a false view of GDP changing
- It does not take account how income is distributed