Saturday, March 22, 2008

GDP per person

Very perceptive piece in the Economist on measuring GDP v/s GDP per person. I remember this from my EMBA class - that even though it looks like Japan is having a bad time with its economy, even if Japan does 0% growth in GDP on GDP per person basis they would have still grown (due to declining population):
Once you accept that growth in GDP per head is the best way to measure economic performance, the standard definition of a recession—a decline in realGDP over some period (eg, two consecutive quarters or year on year)—also seems flawed. For example, zero GDP growth in Japan, where the population is declining, would still leave the average citizen better off. But in America, the average person would be worse off. A better definition of recession, surely, is a fall in average income per person. On this basis, America has been in recession since the fourth quarter of last year when its GDP rose by an annualised 0.6%, implying that real income per head fell by 0.4%.

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