Introduction
Tour Itinerary
Destinations
Small Farm 1
Small Farm 2
Commercial Farm
Non Trad' Farm
Issues
Theories
Pov'ty Indicators
Commodities
Poverty
Econ. of Scale(1)
Income Elasticity
Infant Industries
Commodity Mkts
Econ. of Scale(1)
Lorenz Curve
Malthus
Measuring Pov'ty
Perf. Competition
Cycle of Poverty
Price Ceilings
Prod. Subsidies
Coffee Mkt.
Living Standards
Worksheets
Resources

Home Field Trips Rural Life and Agriculture Tour GDP and International Comparisons

Theories

Using GDP Data to Make International Comparisons

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National income data such as GDP is used to enable comparisons to be made between different countries. Frequently such data is used to compare living standards between countries. In 1998 the GDP per capita of Zambia was US$365 whilst the equivalent GDP per capita figure for Luxembourg was $US49,591. Can the conclusion be drawn that inhabitants of Luxembourg are over 12,000% better off than the inhabitants of Zambia? As with using such data generally as indicators of quality of life, there are some serious problems. They are:

• Failure of GDP per capita indicators to take into account the unevenness of income distribution.
• Failure of GDP per capita indicators to take into account the differences in the level of spending on military goods between countries.
• Failure of GDP per capita indicators to take into account the amount of non-marketed output or output that is produced and sold through the informal sectors.
• Failure of GDP per capita indicators to take into account the differences in tastes, cultures and climates between different countries.
• Failure of the exchange rate that is being used to make the comparison between two countries to reflect the purchasing power of the local currency in each country. In this case using the GDP expressed in terms of purchasing power parity may be more appropriate.
• Failure to take into account the different degrees of accuracy associated with the national income data collected in different countries.
• Failure of GDP per capita to take different countries working conditions into account.

You have now worked through all the theories associated with the Rural Life and Agriculture Tour. Why not go back and have a look at another field trip?

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