1. Uses of National Income Data
A2 Economics

2. Aims and Objectives Aim: Understand uses of national income data.
Assess problems with using GDP as a measure of living standards
Define HDI, HPI, MDP & MI
Explain how these measures measure standards of living and welfare
Analyse HDI internationally
Evaluate the economics of happiness

3. GDP, GNP & NI – Poor Measures of Living Standards
Value of output produced by resources in the UK
GNP
Output produced by resources within the UK, plus net property income (interests, profits, dividends flowing in minus property flowing out) from abroad. NI
Output produced by resources in the UK, plus net property income from abroad, minus depreciation from the UK’s capital equipment.

4. Reasons Poor Measure Ignores value of leisure
GDP incompletely measures output
Distribution of income
Ignores value of leisure
Negative externalities
Excludes non-monetised sector, such as unpaid labour which contributes to GDP
Economic growth may lead to negative externalities which affect living standards. GDP over estimates living standards.
GDP per capita can rise, yet the distribution of income can become more unequal.
Ignores the effect growth has on leisure and welfare, therefore difficult to assess if there has been significant changes in living standards.

5. Alternative Measures of Standards of Living
Human Development Index
Human Poverty Index
Measure of Domestic Progress
Misery Index

6. Human Development Index (HDI)
A measure of economic welfare based on three indicators – standard of living, life expectancy and educational attainment.
The maximum value of HDI is 1.
The closer a country’s HDI is to 1 the greater its’ human development in terms of these three indicators.
Data

7. GDP Per Capita PPP$ Terms 2009
HDI Rank
Country
Life Expectancy 2011
Education Index 2011
GDP Per Capita PPP$ Terms 2009
HDI Value 2011
Top 10 1
Norway
81.1
0.985
47,676
0.943 2
Australia
81.9
0.981
34,259
0.929 3
Netherlands
80.7
0.931
36,358
0.91 4
United States
78.5
0.939
41,761 5
New Zealand
24,706
0.908 6
Canada 81
0.927
34,567 7
Ireland
80.6
0.963
36,278 8
Liechtenstein
79.6
0.818 ..
0.905 9
Germany
80.4
0.928
32,255 10
Sweden
81.4
0.904
32,314 28 UK
80.2
0.815
32,147
0.863
Bottom 5
183
Chad
49.6
0.219
1,181
0.328
184
Mozambique
50.2
0.222
804
0.322
185
Burundi
50.4
0.353
356
0.316
186
Niger
54.7
0.177
626
0.295
187
Congo
48.4
0.356
290
0.286

8. Human Poverty Index (HPI)
A measure of economic welfare based on four basic dimensions of human life: longevity, knowledge, economic provisioning and social inclusion.
% of people likely to die before the age of 60
% of people whose ability to read and write is far from adequate
proportion of the population with disposable incomes of less than 50% of the medium
proportion of long term unemployed (12 months of more)

9. Human Poverty Index & UK
More than 100 million people are relatively poor within all of the twenty-four OECD countries
In the UK, 13.5% of the population have an income below the income-poverty threshold of 50% of average income
21.8% of the population in this country are said to be "functionally illiterate" - unable to read many basic instructions on medicine bottles or read stories to their children
The UK ranked 14th (out of 17) for long-term unemployment
Sweden has the lowest overall incidence of human poverty followed by the Netherlands and Germany. The worst country is the USA followed by Ireland and the UK

10. The Misery Index (MI)
A measure of economic welfare constructed by adding the unemployment rate to the inflation rate on the assumption that a high inflation and unemployment rate means a higher level of economic and social costs for a country.
Guardian Article

13. Measure of Domestic Progress (MDP)
A measure of economic welfare designed to reflect progress in quality of life and progress towards a sustainable economy by factoring in the social and environmental costs of growth, and benefits of unpaid work such as volunteer work and house work.
Essentially is the ‘Economics of Happiness’
Article

14. Measures of Standard of Living and Economic Welfare
Having discussed and analysed the different measures of economic welfare and standards of living, which do you feel is the most accurate?
What do you feel are the limitations of these measures?
HDI
HPI MI
MDP