Limitations of income per capita in measuring the standards of living in different countries

  

Date Posted: 10/12/2017 2:11:08 AM

Posted By: lydiajane74  Membership Level: Gold  Total Points: 4091

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Limitations of income per capita in measuring the standards of living in different countries
i. Regional variations in income and spending: National data can hide regional variations
in output, employment and income per head of the population
ii. Inequalities in income and wealth: Average (mean) incomes might rise but inequality
could grow
iii. Leisure and working hours and working conditions: An increase in real GDP might have
been achieved at the expense of leisure time if workers are working longer hours or if
working conditions have deteriorated
iv. Imbalances between consumption and investment: High levels of investment as a
share of GDP might be superb for creating extra capacity to produce but at the expense
of consumer goods and services for the current generation
v. Changes in life expectancy: Improvements in life expectancy don't always show through
in GDP accounts. Putting a monetary value on the benefits of increased longevity is
difficult
vi. The value of non-marketed output: Much useful and valuable work is not sold in
markets at market prices. The value of the output of people working for charities, self-
help groups and of housework might reasonably be added to national income statistics

vii. Innovation and the development of new products: New goods and services become
available because of invention and innovation that simply would not have been
available to the richest person on earth less than fifty years ago. About half of what we
spend our money on now was not invented in 1870. Examples include air travel, cars,
computers, antibiotics, hip replacements, insulin and many other life-enhancing and life-
saving drugs
viii. Environmental considerations: Rising output might have been accompanied by an
increase in air and noise pollution and other externalize effects that have a negative
effect on our social welfare
ix. Defensive expenditures: Much spending is to protect against an economic or social bad
examples crime, or spending to clean up the effects of pollution and waste.

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