WHY ECONOMISTS STUDY GDP!

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WHY ECONOMISTS STUDY GDP!

• GDP AND CORRELATES

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SCATTER PLOT OF DEATH- RATES and GDP
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USE THE LOG OF GDP
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DRAW LINE OF BEST FIT
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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

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Suppose we look at something less distressing
cable subscribers per 1,000 of the population!
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Plotted against GDP
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Infant mortality and GDP
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Only this time take log of both sides
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The red line tells us that

• On average a 10 increase in income means a 5
  fall in infant mortality!

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Life Expectancy and GDP
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Daily Newspapers/1000 population
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Telephones per 1,000
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Motor Vehicles
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Women over the age of 65 per 100 Men over the age
of 65
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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-GNPincome paid to foreigners,
  or
• GDP-income paid to foreignersGNP

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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.

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How substantial are the differences between GDP
and GNP?
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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
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What characterizes those with the highest
imbalance?

• Size
• Special Commodity