Appendix A - Gross Domestic Product

A country's Gross Domestic Product (GDP) represents the sum of value added by all producers in that country. Value added is the value of the gross output of producers less the value of intermediate goods and services used in production. It is generally used to measure the size of an economy. However, it should not be interpreted as necessarily measuring the wealth and well-being of the residents of that country. A better measure of the latter is Gross National Income.

Gross National Income (GNI), which used to be called Gross National Product (GNP), measures the total domestic and foreign value added claimed by residents. It includes GDP plus net receipts of primary income from non-resident sources, where "primary income" is defined as compensation of employees and property income. For many countries the inflows and outflows of primary income tend to balance out, leaving little difference between GDP and GNI. However, for some countries, the difference can be substantial. For example, GDP was 17 percent higher than GNI in Ireland in 2001.

Purchasing Power Parities (PPPs) are currency conversion rates that allow output in different currency units to be expressed in a common unit of value. A PPP is the ratio between the number of units of a country's currency and the number of dollars required to purchase an equivalent basket of goods and services within each respective country.

GDP per capita (charts 1.1, 1.2, 5.4)

GDP per capita converted at PPP rates (charts 1.1 and 5.4). The comparisons shown in charts 1.1 and 5.4 are based on measures of GDP converted at PPP rates and on population size. Measures for chart 1.1 are taken from the data underlying a periodic report published by BLS for the United States, Canada, Australia, Japan, Korea, Austria, Belgium, Denmark, France, Germany, Italy, Netherlands, Norway, Sweden, and the United Kingdom. For the remaining countries, the measures are based on data published by the World Bank. The comparisons shown for the emerging economies in chart 5.4 also are based on World Bank data. The U.S. data are from BLS.

Source: BLS, "Comparative Real Gross Domestic Product Per Capita and Per Employed Person, Fifteen Countries, 1960–2004," July 22, 2005, http://www.bls.gov/fls/; and World Bank, World Development Indicators Database, http://www.worldbank.org/.

Average annual growth rates in real GDP per capita (chart 1.2). Real GDP is GDP that has been adjusted for overall price changes over time, in order to remove the effects of inflation. Change in real GDP per capita over time is the result of changes in both a country's real GDP and in its population. For chart 1.2, the estimates of real GDP are based on data from BLS, OECD, and several country sources.

Measures are taken from the data underlying a periodic report published by BLS for the United States, Canada, Australia, Japan, Korea, Austria, Belgium, Denmark, France, Germany, Italy, Netherlands, Norway, Sweden, and the United Kingdom. For the remaining countries, a variety of sources are used: World Bank for all 2004 population data; OECD for all GDP data except Ireland, New Zealand, Hong Kong, and Singapore, and for all 1994 population data except Hong Kong and Singapore. GDP data for Ireland are from the Irish Central Statistics Office; for New Zealand, from the Reserve Bank of New Zealand; for Hong Kong, from the Hong Kong Census and Statistics Department; and for Singapore, from Statistics Singapore. Population data for 1994 for Hong Kong and Singapore are from the U.S. Census Bureau's International Data Base.

Source: BLS, "Comparative Real Gross Domestic Product Per Capita and Per Employed Person, Fifteen Countries, 1960–2004," July 22, 2005, http://www.bls.gov/fls/; World Bank, World Development Indicators Database, http://www.worldbank.org/; OECD, STAN Industrial Analysis Database, http://www.oecd.org; OECD, Main Economic Indicators: September Volume 2005, Issue 9, Paris, September 2005, p. 65; OECD, National Accounts of OECD Countries: Main Aggregates, Volume I, 1992-2003, 2005 Ed., Paris, January 2005, part I; Hong Kong Census and Statistics Department, http://www.info.gov.hk/censtatd/; Ireland Central Statistics Office, Statistical Yearbook of Ireland 2004, Dublin, October 2004, table 7.2; Reserve Bank of New Zealand, http://www.rbnz.givt.nz/; Statistics Singapore, http://www.singstat.gov.sg/; and U.S. Census Bureau, International Data Base, http://census.gov/.

GDP per employed person (chart 5.5)

This indicator gives GDP measured in 1990 U.S. dollars converted at PPP rates divided by the number of employed persons. For an extensive discussion of the indicator, including details of its construction and some limits to comparability, see the source document.

The use of employed persons in the denominator of the indicator does not standardize sufficiently the measure of labor input. The number of hours worked, on average, by each employed person can vary markedly across countries and over time.

This indicator may be viewed as giving the amount of GDP attributable on average to each employed person, working in tandem with all other inputs or factors of production.

Source: ILO, Key Indicators of the Labor Market, 4th Ed., Geneva, 2005, table 17a.