Modification de Gross Domestic Product (GDP)

  | cours = [[Introduction to Macroeconomics]]

*[[Nicolas Maystre]]<ref>Researchgate.net - [https://www.researchgate.net/profile/Nicolas_Maystre Nicolas Maystre]</ref><ref>Google Scholar - [https://scholar.google.com/citations?user=B73U0wsAAAAJ&hl=en Nicolas Maystre]</ref><ref>VOX, CEPR Policy Portal - [https://voxeu.org/users/nicolasmaystre0 Nicolas Maystre]</ref><ref>[http://nicolas.maystre.ch/ Nicolas Maystre's webpage]</ref><ref>Cairn.info - [https://www.cairn.info/publications-de-Nicolas-Maystre--104530.htm Nicolas Maystre]</ref><ref>Linkedin - [https://www.linkedin.com/in/nicolas-maystre-82660737/?originalSubdomain=ch Nicolas Maystre]</ref><ref>Academia.edu - [https://unctad.academia.edu/NicolasMaystre Nicolas Maystre]</ref>

*[[Introductory aspects of macroeconomics]]

*[[Gross Domestic Product (GDP)]]

*[[Consumer Price Index (CPI)]]

*[[Production and economic growth]]

*[[Unemployment]]

*[[Financial Market]]

*[[The monetary system]]

*[[Monetary growth and inflation]]

*[[Open Macroeconomics: Basic Concepts]]

*[[Open Macroeconomics: the Exchange Rate]]

*[[Equilibrium in an open economy]]

*[[The Keynesian approach and the IS-LM model]]

*[[Aggregate demand and supply]]

*[[The impact of monetary and fiscal policies]]

*[[Trade-off between inflation and unemployment]]

*[[Response to the 2008 Financial Crisis and International Cooperation]]

| es = Producto interno bruto (PIB)

== The three lenses ==

The three lenses offer three interpretations of GDP as well as three ways of calculating it.

The '''production perspective''': the value of the final annual production of residents in terms of flows = sum of the values added.

'''Income perspective''': the total income of all members of the economy = distribution of the sum of value added among economic agents (wages + return on capital).

'''Expenditure perspective''': the total expenditure devoted to the acquisition of the B&S produced by this economy = use of the product by the various groups of agents.

These three measures are necessarily equivalent (cf. FSO data 1990-2007).

== Production perspective ==

:::GDP = the sum of value added

The ''added value'' is the increase in the value of the products resulting from the production process. In the national accounts, the added value is obtained by balance :

:::Added Value = value of production - intermediate consumption

Intermediate goods and added value: GDP only includes the value of final goods!

Example - hamburger macdo :

*Price of the purchased meat (150 gr.) = 0.50 Frs (hp: no purchase of intermediate goods)

*Sale price hamburger = 2.00 Frs

*MacDo added value = 1.50 Frs

*The GDP is the sum of the added values, here 0.50 + 1.50 = 2.00 Frs (and not 2.50!) = value of the final goods (here only one).

== Income perspective ==

:::GDP = Σ of compensation of factors of production - production subsidies + indirect taxes + depreciation

As we have seen, if to GDP we add factor income from the rest of the world and subtract factor income paid to the rest of the world, we obtain the National Product (NP).

The '''NATIONAL product''' (e.g. GNP) includes all the production carried out by residents both inside and outside the territory. The criterion is therefore that of residence.

The '"INTERNAL product"' (e.g. GDP) covers all production carried out on the territory by both residents and non-residents. The criterion is therefore that of territory.

According to a number of economists, the national product is a better measure of a country's income, especially at a time of strong economic integration (movement of factors between countries) such as today (cf. video by J. Stiglitz).

== Expenditure perspective: the components of GDP ==

GDP = Production = Consumption + Investment + Public Expenditure + Trade Balance (= Exports - Imports)

:Y ≡ C + I + G + X - M (<math>X - M</math> = Trade balance)

Y ≡ domestic demand (C + I + G - M) + external demand (X)

This is an accounting identity! Household production is the same as resident consumption plus non-resident net consumption.

:<math>C</math> includes household expenditure on durable goods (cars, refrigerators ...), perishable goods (food) and services (health, lawyer, hairdresser ...).

:<math>I</math> includes business and household investments (buildings)

:<math>G</math> includes only public expenditure on goods and services (social transfers (unemployment, AHV, etc.) and interest on public debt are not included as they are not a counterpart of a good or service produced in the year).

== The components of GDP: examples ==

== Production perspective: an example ==

== Expenditure perspective: an example ==

NB: these three alternative ways of calculating GDP give exactly the same result.

== Real and nominal GDP: calculations ==

The real increase in GDP is much less dramatic than the nominal increase, as there is a significant increase in prices during the period.

== Nominal vs. actual: more in general ==

In a simplified economy producing only two goods, hot dogs (good 1) and hamburgers (good 2), nominal GDP (or GDP at current prices) in <math>t</math> is written :

Sf the prices of hot dogs and hamburgers are respectively p10 and p20 in the initial (base) period, real GDP (or GDP at constant prices) in the year <math>t</math> is :

A change in nominal GDP may therefore be due to a change in prices (good 1 and/or good 2) and/or a change in quantities produced (good 1 and/or good 2):

But only a change in quantities can change real GDP :

== The GDP deflator ==

The GDP deflator is the index by which nominal GDP must be divided to obtain real GDP. It is therefore given by :

GDP Deflator = <math>\frac {PIB\, nominal\, (= p_1^t \times q_1^t + p_2^t \times q_2^t)} {PIB\, \text{real}\,(=p_1^0 \times q_1^t + p_2^0 \times q_2^t)} \times 100</math>

And so:

Real GDP = math>\frac {PIB\, nominal}{\text{GDP deflator}} \times 100</math>

and, approximately,

:% change nominal GDP ≈ % change real GDP + % change GDP deflator

In the previous example, between 2003 and 2005 prices increased by 140%.

== Real and nominal GDP: example ==

= GDP as a welfare measure =

== Technical Reviews of National Accounts ==

The reliability of the data depends on the degree of sophistication of the statistical apparatus (and other possible internal priorities: see the case of China, The Economist, 01.03.2008). Sometimes indirect rather than direct estimates are preferred because of a lack of accounting data.

The national accounts do not take into account the "weight" of underground activities and undeclared work. Moreover, it records production (flows) rather than wealth (stocks).

It is an indicator of quantitative rather than qualitative changes and does not take into account the wealth produced and consumed by the individual (self-consumption) or voluntary work (cf. FSO, 01.11.2004, on the estimation of unpaid work in Switzerland).

== GDP as a measure of well-being ==

GDP is also used by economists to measure the well-being of individuals in an economy.

Dividing GDP by population gives the average income of individuals in a society. This is often used as a proxy for the level of well-being and development of an economy.

In principle a higher GDP per capita indicates a higher standard of living and a higher stage of development.

Problem: This is clearly not an ideal indicator because it focuses on only part of what influences the quality of life of individuals and the level of development of countries. According to some economists, alternative measures of well-being should be developed that take into account factors other than GDP (cf. The Economist, 17.09.2009).

Example => Human Development Index (United Nations Human Development Index); Green GDP in China, etc.

== GDP per capita cannot capture everything ==

What about environmental depreciation (environmental capital)? What about the value of leisure time? What about income inequality? ... Shouldn't these factors also be taken into account when assessing quality of life?

== Measuring Social Well-Being ==

<youtube>QUaJMNtW6GA</youtube>

This is leading some economists to think about a new way of measuring quality of life (e.g. Stiglitz: see his video + article) that:

#takes into account the depreciation of environmental capital

#is based on the concept of "national" rather than "domestic" (more appropriate in a globalized world)

#considers income inequality (going to the limit to [[The egalitarian theory of distributive justice by John Rawls|Rawls' ideas]]: the level of well-being of a society = the level of well-being of the lowest)  

#and considers the value of leisure

The problem is that the introduction of these concepts is not trivial. It is necessary to be able to give an economic value to 1), 3) and 4), which is not obvious, and it is necessary to construct reliable and internationally comparable data series .

Pending a better indicator, GDP per capita continues to be used as a measure of the level of well-being .

The problem is that the accounting framework used to measure quality of life (GDP) is not without consequences for the objectives that politicians and government set themselves. Very little weight will be given to increasing inequality, environmental degradation, etc., if the measure of a country's success is GDP.

On the other hand, it has also been argued that GDP per capita is an indicator that is very highly correlated with many other variables influencing quality of life. In general, it is in the richest countries that we have enough resources to invest in environmental protection, that we find relatively high levels of education and health, that we can afford to pay attention to workers' free time, that inequalities are less striking, and so on.

PIB par tête et mortalité infantile.png|GDP per capita and infant mortality.

PIB par tête et alphabétisation.png|GDP per capita and literacy.

PIB par tête et espérance de vie.png|GDP per capita and life expectancy.

PIB par tête et faim.png|GDP per capita and hunger.

PIB par tête et indice de Gini.png|GDP per capita and [https://en.wikipedia.org/wiki/Gini_coefficient Gini index].

PIB par tête et indice de développement humain (IDH).png|GDP per capita and Human Development Index (HDI).

PIB par tête et IDH dans les pays à revenu élevé de l'OCDE.png|GDP per capita and HDI in high-income OECD countries.

= Summary =

GDP is the value of output at market prices of all goods and services produced within an economy over a certain period of time.

There are other definitions of aggregate income that take into account, for example, the depreciation of capital with which income is produced (NDP), or the output of nationals across borders (GNP).

GDP can be broken down into four components: consumption, investment, government expenditure and trade balance...

The difference between nominal and real GDP is given by price developments in the economy.

The GDP deflator measures the change in the price level in an economy.

GDP per capita is a good measure of the level of development or quality of life in an economy.

But it is far from a perfect measure because it does not take into account leisure time, the impact on the environment, income inequality and so on.