Gross Domestic Product
Gross Domestic Product (GDP) measures the total value of goods and services produced.
Why This Matters
Gross Domestic Product (GDP) is the most widely used indicator of economic health. It is a measure of the total market value of goods and services produced within an area over a period of time. It includes personal consumption, government purchases, private inventories, paid-in construction costs and the foreign trade balance (exports are added, imports are subtracted).
GDP aggregates production from different sectors of the economy to provide a picture of the overall level of economic activity occurring in the given jurisdiction over the given time period. It can be used as an indicator for economic activity but due to the way it is measured and what is included and excluded, important dimensions of prosperity can be left out (see Measurement and Limitations below) and therefore the indicator should therefore be used with caution when it is acting as a proxy for economic and societal well-being (Scwartz, 2010).
Measurement and Limitations
GDP is important as a measure of economic activity simply because it is the standard measure and is followed so closely. However, there are long standing criticisms of its usefulness as an indicator of economic prosperity more generally.
As explained in the OECD Observer: “If ever there was a controversial icon from the statistics world, GDP is it. It measures income, but not equality, it measures growth, but not destruction, and it ignores values like social cohesion and the environment. Yet, governments, businesses and probably most people swear by it.” (OECD, 2005)
It is useful for determining (once inflation has been accounted for) whether the economy is expanding or contracting but the choices as to what is counted as “production” may seem arbitrary; for example, taking care of one’s own children does not count, but hiring a nanny does.
GDP captures at least the well-being that results from the production of goods and services, but may miss out on broader aspects of well-being such as environmental integrity and social capital. For this reason, it is most appropriate to use it as one of a number of indicators of prosperity (Schwartz, 2010; OECD, 2007).
Data is updated on Peg as it becomes available from the data providers.
OECD. (2007). Is GDP a satisfactory measure of growth? OECD Observer, 246-247. Retrieved from: http://www.oecdobserver.org/news/archivestory.php/aid/1518/Is_GDP_a_satisfactory_measure_of_growth_.html
Schwartz, J.D. (2010). Is GDP an Obsolete Measure of Progress? Time Magazine, January 30, 2010. Retrieved from: http://content.time.com/time/business/article/0,8599,1957746,00.html
The Conference Board of Canada. (2013). Gross Domestic Product (GDP) Forecast. Retrieved from: http://www.conferenceboard.ca/e-data/data/gdp.aspx
Gross Domestic Product in the Sustainable Development Goals
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8. Promote inclusive and sustainable economic growth, employment and decent work for all
Roughly half the world’s population still lives on the equivalent of about US$2 a day. And in too many places, having a job doesn’t guarantee the ability to escape from poverty. This slow and uneven progress requires us to rethink and retool our economic and social policies aimed at eradicating poverty.
A continued lack of decent work opportunities, insufficient investments and under-consumption lead to an erosion of the basic social contract underlying democratic societies: that all must share in progress. The creation of quality jobs will remain a major challenge for almost all economies well beyond 2015.
Sustainable economic growth will require societies to create the conditions that allow people to have quality jobs that stimulate the economy while not harming the environment. Job opportunities and decent working conditions are also required for the whole working age population.
Related Gross Domestic Product Targets
Sustain per capita economic growth in accordance with national circumstances and, in particular, at least 7 per cent gross domestic product growth per annum in the least developed countries