Embedded Files
We have taken our inspirations from the following Socio-Economic Growth Indicators that are used universally to measure social and economical performances. Note that this is not an an all-encompassing list of all socio-economic indicators.
Gross Domestic Product (GDP)
Gross Domestic Product (GDP)
Gross Domestic Product (or GDP) is the most renowned metric for measuring economic activity. It is found by totalling the value of all final goods and services produced in a country over the course of a year. There are three ways to calculate GDP:
- Expenditure Approach: Calculated by summing the total expenditures on all final goods and services:
OR
- Income Approach: Calculated by adding up the factor incomes to the factors of production in the society.
- Output Approach: Calculated by summing the value of sales of goods and subtracting the purchase of intermediate goods to produce the goods sold.
GDP is useful because it is well defined and measures value in such a way that can be applied across widely diverse and dissimilar regions. Each factor that GDP is composed of can be rigorously and uniformly measured despite differences in culture, currency valuations, or climate. As such, the GDP of Japan or Germany measures the same thing as the GDP of the US which is an important nuance that is often overlooked. To adjust for differences in population, economists often use GDP per capita (GDP divided by the population) as a metric for comparing the GDP between countries.
Gross National Product (GNP)
Gross National Product (GNP)
Gross National Product is very similar to GDP in that it includes all the factors used to calculate GDP through the expenditure method but also adds income that residents might accrue from foreign investments while subtracting income that residents send abroad.
Although GDP is still the most popular metric for measuring economic growth, observing differences between GDP and GNP can indicate changes in a country’s level of international trade, production, or financial operations. It is important to mention that GNP might be inflationary if a country’s wealthiest citizens routinely move their money offshore.
Gross National Income (GNI)
Gross National Income (GNI)
Gross National Income is yet another economic indicator that is very similar to GDP but measures growth slightly differently. GNI is the sum of value added by all resident producers plus any product taxes (minus subsidies) not included in the valuation of output plus net receipts of primary income (compensation of employees and property income) from abroad. We can calculate GNI by adding foreign income paid to resident employees, foreign income paid to residential property owners and investors, and net taxes minus subsidies receivable on production and imports to GDP.
Out of all the economic indicators, GNI is the second most widely used; in fact, the World Bank prefers to use GNI over GDP and many people increasingly consider GNI to be the more accurate metric of national wealth given the mobility of modern populations and global commerce. Differences between the two arise when a given country receives a lot of foreign aid or when foreigners control a large proportion of a country's production.
Human Development Index (HDI)
Human Development Index (HDI)
The Human Development Index is a pretty radical shift away from GDP. Developed by the UN, the HDI is a statistic composite index of life expectancy, education, and per capita income indicators that is meant to emphasize that people and their capabilities should be the ultimate criteria for assessing the development of a country, not economic growth alone.
Calculating HDI is more complex than GDP, GNP, or GNI and involves taking the geometric mean of normalized indices for each of the three dimensions: Life Expectancy, Education, and Income.
Academics have challenged the value of HDI as a comprehensive measure of non-economic (primarily social) growth, as an indicator that entirely ignores environmental effects, and is subject to the limitations of purchasing power parity measurements in the short run.
Information about how each index is calculated can be found here.
Physical Quality of Life Index (PQLI)
Physical Quality of Life Index (PQLI)
The Physical Quality of Life Index is much like HDI in that it takes into account physical variables like education and health, but unlike HDI it only takes into account these physical attributes and doesn’t consider any measurement of GDP or GNI.
Its calculation is as follows:
PQLI, however, falls some shortcomings as well as it entirely ignores environmental effects and also is only concerned with current welfare and are not related to the future.
Page updated
Report abuse