why economists study gdp! gdp and correlates. scatter plot of death- rates and gdp
Post on 22-Dec-2015
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WHY ECONOMISTS STUDY GDP!
GDP AND CORRELATES
SCATTER PLOT OF DEATH- RATES and GDP
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GDP
DE
AT
H
USE THE LOG OF GDP
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LOG(GDP)
DE
AT
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DRAW LINE OF BEST FIT
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LOG(GDP)
DEATHDEATHF
UN-LOG TO SEE IT RAW
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WHAT WAS THAT EQUATION?
• DEATH RATE = 20.7-1.45LOG(GDP)
• ASIDE: MEANS DEATH RATE FALLS BY 15% FOR EVERY 10% INCREASE IN GDP
Suppose we look at something less distressing:
cable subscribers per 1,000 of the population!
Plotted against GDP
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CABLEPER000CABLEPER00F
Infant mortality and GDP
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INF
MO
RT
Only this time take log of both sides
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LOG(GDP)
LOG(INFMORT)LOG(INFMORTF)
The red line tells us that:
• On average a 10% increase in income means a 5% fall in infant mortality!
Life Expectancy and GDP
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GDP
LIFELIFEF
Daily Newspapers/1000 population
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NEWSNEWSF
Telephones per 1,000
-200
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TELEPHTELEPHF
Motor Vehicles
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MVSMVSF
Women over the age of 65 per 100 Men over the age of 65
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LOG(GDP)
W65PERMW65PERMF
Country W65PERMTonga 300Russian Federation 232Latvia 224Estonia 217Korea, Dem. Rep. 213Ukraine 212Belarus 209Kazakhstan 207Lithuania 193Slovenia 186Germany 179Kyrgyz Republic 178Botswana 177Croatia 175Austria 173Georgia 172Finland 169Cambodia 169Korea, Rep. 169Azerbaijan 168Moldova 167Cape Verde 167Luxembourg 167Poland 166Hungary 164Turkmenistan 164Czech Republic 162
United States 144Vietnam 144Japan 143Equatorial Guinea 143United Kingdom 142Mauritania 142Chile 142Argentina 142Macao, China 141Malta 141Denmark 141Paraguay 141Spain 140Norway 138Nigeria 138Djibouti 138Romania 137Central African Republic 137Canada 136Congo, Dem. Rep. 136Sweden 136
Comoros 100Benin 99Sri Lanka 98Iran, Islamic Rep. 98Cote d'Ivoire 96Libya 96Pakistan 96Zambia 95Tunisia 94Kuwait 93Yemen, Rep. 90Bahrain 87Chad 82Bangladesh 79Jordan 79Vanuatu 75Mozambique 75Maldives 60United Arab Emirates 59Qatar 40
Does it Matter if We Study GDP or GNP?
• What is the difference?
• GDP speaks to domestic production
• GNP is concerned with income received by domestic citizens
• The difference GDP-GNP=income paid to foreigners, or
• GDP-income paid to foreigners=GNP
Why is income paid to foreigners?
• If foreigners invest capital in Canada, they receive payments for that capital – rental payments.
• Similarly, Canadians receive income from their capital located outside the country.
• GNP reflects the flow of that capital.
How substantial are the differences between GDP and GNP?
(GNP-GDP)/ GDP
-20.0
-15.0
-10.0
-5.0
0.0
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30.0
Ser ies1
Not that much for most countries. For example:
Country (GNP-GDP)/GDP Population
Kiribati 25.9 76,000
Lesotho 21.1 1,898,000
Brunei 15.4 276,000
Eritrea 9.1 3,400,000
Luxembourg 5.0 398,000
Kuwait 3.3 1,461,000
Malta 2.0 364,700
Switzerland 1.9 6,900,000
United Arab Emirates 1.9 2,230,000
Suriname 1.9 405,000
Vanuatu 1.7 160,000
Saudi Arabia 1.4 17,300,000
Lebanon 1.3 3,855,000
Qatar 1.2 580,000
Marshall Islands 1.1 50,000
What characterizes those with the highest “imbalance”?
• Size
• Special Commodity