Other Methods of Measuring Economic Growth

As well as GDP there are many other methods of measuring a countries economic and social growth. These include the HDI, GNP and GDP per capita.

GDP per capita is the amount of GDP divided by the population of the respective country. This method is a better measure than GDP as it allows us to take into account the individual person’s share of the country’s wealth. It is important to note however that GDP per capital isn’t the wealth of every person but what they could earn if the country’s wealth was split equally. GDP per capita is a more meaningful comparison between countries.

HDI is the Human Development Index is a measure of human development established by the UN as a measure of growth not solely based on national income. It measures the life expectancy, infant mortality and general health provisions, literacy rate and the education of citizens and the average income of a country therefore giving it a broader criterion than GDP. HDI takes into account important social aspects of a country such as its health and education system that is omitted by GDP. HDI is a measure between 0 and 1 with 0 being terrible and 1 being very good.

GNP is another measure of growth and stands for Gross National Product. It is similar to GDP as it is a money measure (as oppose to HDI with includes cultural aspects) and even includes GDP in its measure. The difference between GDP and GNP however is that GNP includes all foreign UK owned factors of production. It is defined as GDP + Net Property Income from Abroad (NPIA). NPIA is the net balance of dividends, interest and profit from our overseas assets. As there is much foreign investment into the UK whilst there is also a lot of UK investment overseas it means that UK GNP is often larger than our GDP. However for Ireland where they are a recipient of a lot of foreign investment and don’t have much outward investment their GNP is usually lower than their GDP.