Given a constant rate of growth of real gdp, what would cause a fall in real gdp per capita?

What do these indicators tell us?

GDP per capita and GDP per capita annual growth rate are widely used by economists to gauge the health of an economy. The annual growth rate of real GDP per capita is included as an indicator for SDG 8: "Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all".

How are they defined?

GDP per capita, purchasing power parity (PPP) (current international $) - This is the GDP divided by the midyear population, where GDP is the total value of goods and services for final use produced by resident producers in an economy, regardless of the allocation to domestic and foreign claims. It does not include deductions for the depreciation of physical capital, or the depletion and degradation of natural resources. PPP indicates the rate of exchange that accounts for price differences across countries, allowing for international comparisons of real output and incomes. An international dollar has the same purchasing power in the domestic economy as the US dollar has in the United States. PPP rates allow for standard comparisons of real prices among countries, just as conventional price indexes allow for comparisons of real values over time. The use of normal exchange rates could result in overvaluation or undervaluation of purchasing power.

GDP per capita annual growth rate - This is defined as the least-squares annual growth rate, calculated from the constant price GDP per capita in local currency units.

What are the consequences and implications?

Higher income is usually associated with lower rates of malnutrition. Improving income, however, reduces malnutrition to only a small degree (World Bank, 2006). For example, when the gross national product (GDP plus the net factor income residents receive from abroad for factor services [labour and capital], minus the income earned by foreign residents contributing to the domestic economy) per capita in developing countries doubled, the nutrition situation did improve, but reductions in underweight rates were only modest. On the basis of the correlation between growth and nutrition, it is estimated that sustained per capita economic growth would indeed reduce malnutrition, but not by a drastic amount. These estimates suggest that countries cannot depend on economic growth alone to reduce malnutrition within an acceptable time.

Source of data

World Bank. DataBank: World development indicators (http://databank.worldbank.org/data/home.aspx).

Further reading

Repositioning nutrition as central to development: a strategy for large-scale action. Washington (DC): World Bank; 2006 (http://documents.worldbank.org/curated/en/185651468175733998/Repositioning-nutrition-as-central-to-development-a-strategy-for-large-scale-action-overview).

Internet resources

United Nations. Global Sustainable Development Goals indicators database (https://unstats.un.org/sdgs/indicators/database/).

Gross domestic product (GDP) is the standard measure of the value added created through the production of goods and services in a country during a certain period. As such, it also measures the income earned from that production, or the total amount spent on final goods and services (less imports). While GDP is the single most important indicator to capture economic activity, it falls short of providing a suitable measure of people's material well-being for which alternative indicators may be more appropriate. This indicator is based on nominal GDP (also called GDP at current prices or GDP in value) and is available in different measures: US dollars and US dollars per capita (current PPPs). All OECD countries compile their data according to the 2008 System of National Accounts (SNA). This indicator is less suited for comparisons over time, as developments are not only caused by real growth, but also by changes in prices and PPPs.

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Definition of Gross domestic product (GDP)

Gross domestic product (GDP) is the standard measure of the value added created through the production of goods and services in a country during a certain period. As such, it also measures the income earned from that production, or the total amount spent on final goods and services (less imports). While GDP is the single most important indicator to capture economic activity, it falls short of providing a suitable measure of people's material well-being for which alternative indicators may be more appropriate. This indicator is based on nominal GDP (also called GDP at current prices or GDP in value) and is available in different measures: US dollars and US dollars per capita (current PPPs). All OECD countries compile their data according to the 2008 System of National Accounts (SNA). This indicator is less suited for comparisons over time, as developments are not only caused by real growth, but also by changes in prices and PPPs.

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Source database

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