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Measuring Global Competitiveness

Measuring Global Competitiveness. Beyond the GDP. Gross Domestic Product. Basically, the value of all goods and service produced within a country over the year Often presented as GDP per capita A country’s GDP divided by it’s population Works out to a per person average. GDP. GDP =

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Measuring Global Competitiveness

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  1. Measuring Global Competitiveness Beyond the GDP

  2. Gross Domestic Product • Basically, the value of all goods and service produced within a country over the year • Often presented as GDP per capita • A country’s GDP divided by it’s population • Works out to a per person average

  3. GDP GDP = Consumption + investment + (government spending) + (exports − imports)

  4. Gross Domestic Product • Why is this a good indicator of a country’s success in the global economy? • What are some weaknesses of the GDP as an economic indicator?

  5. GPI • Genuine Progress Indicator (GPI) created in 1995 as an alternative to the gross domestic product (GDP) • The GPI enables policymakers at the national, state, regional, or local level to measure how well their citizens are doing both economically and socially

  6. GPI • Economists, policymakers, reporters, and the public rely on the GDP as a shorthand indicator of progress • but the GDP is merely a sum of national spending with no distinctions between transactions that add to well-being and those that diminish it

  7. How is it determined? • The GPI starts with the same personal consumption data that the GDP is based on, but then makes some crucial distinctions • It adjusts for factors such as income distribution • It adds factors such as the value of household and volunteer work • It subtracts factors such as the costs of crime and pollution

  8. Considerations: • Income Distribution • Housework, Volunteering, and Higher Education • Crime • Resource Depletion • Pollution • Long-Term Environmental Damage • Changes in Leisure Time • Defensive Expenditures • Lifespan of Consumer Durables & Public Infrastructure • Dependence on Foreign Assets

  9. How do we compare the two? • The GDP vs the GPI is basically the same as the difference between the Gross Profit of a company and the Net Profit • The Net Profit is what determines the long term health of the company • Accordingly, the GPI will be zero if the increases in dollar costs of crime and pollution equal the total dollar rise in production of goods and services (all other factors being constant)

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