Translated by
2012/04/04 12:38:54

GDP - Gross domestic product (Gross Domestic Product, GDP)

The macroeconomic indicator reflecting the market value of all final goods and services (i.e. intended for the direct use) made in a year in all branches of the economy in the territory of the state for consumption, export and accumulation, regardless of national identity of the used production factors.


The economist from Russia Semyon Kuznets created a traditional calculation formula of gross domestic product in the early thirties.

GDP per capita at par purchasing power (PPS)

The gross domestic product calculated at par purchasing power. The English equivalent of the term - Gross Domestic Product At Purchasing Power Parity.

Determination of the World Bank: GDP per capita is calculated at par purchasing property (PPS). GDP on PPS is the gross domestic product calculated in the international dollars using settlement indicators of purchasing power parity. The international dollar has the same purchasing power to GDP what US dollar has in the United States of America. GDP on PPS represents the amount of the gross product created by all residents in economy to which all taxes on goods increase and from which any subsidies which are not included in the cost of goods are subtracted. It is calculated without depreciation charges or on exhaustion of natural resources.

The rating of the countries of the world on GDP on PPS

Differences from GNP

The Gross National Product (GNP) is calculated as well as GDP, but differs from it on the value equal to balance of calculations with foreign countries.

GNP differs from GDP still in the fact that in it the criterion of national ownership is used. So products of the plant which is owned, say, by Germans in the territory of Russia will join in the Russian GDP, but not in GNP. The stare to Central Europe, for example, shows that in the last 10 years of GDP grew much quicker, than GNP - productions work, but do not belong to "country"[1].

Search of an alternative of GDP

Techniques of calculations of GDP changed repeatedly, and each country could do everything in own way. In some states when calculating GDP the so-called "conditional rent" which took payments for lease of housing into account was considered even if it belongs to you, others did not consider it, but in general the formula developed by the economist from Russia regularly worked.

Approach of an era of general digitalization and emergence of the whole branches of the economy working only on the Internet gave an impetus to search of new approaches to calculation of the created goods and services and also welfare of citizens. The famous American economist, the Nobel Prize laureate Joseph Stiglitz directly said that enormous social stratification in the USA does senseless former approach to assessment of a national wealth and it is necessary to develop more "the fair indicator" of calculation of economic growth which would reflect new realities.

There are several alternative valuation methods of economic growth and a national wealth, in particular so-called "green GDP" when the cost of ecological costs is subtracted from a traditional gross product. And they in some countries can reach very high values and seriously adjust a kind picture of economic growth. But how to compensate effects of environmental disasters or natural disasters? Anyway it will be necessary to spend work and certain resources for elimination of these effects. And they should be made previously. And if they were already made, and then are used, then it is already repeat count. As a result the ends do not meet with the ends in any way.

One more alternative to traditional GDP — the so-called indicator of original progress or GPI. At its calculation the cost of all manufactured goods and services in terms of money is traditionally considered, but then the long-term effect of durable goods and unpaid homework is added here, and costs of corruption, crime and deterioration in the environment are subtracted. Still here extent of property stratification of society, level of a national debt and degree of demographic load of economy is considered. However, as it is correct to count a contribution to GDP from washing and cleaning of the apartment and it is correct to subtract from a cumulative product of costs from corruption and organized crime, still nobody explained with sense.

At the Davos economic forum in 2017 the index of inclusive development was submitted. It considers not only the created national product, but also 11 more parameters, including labor productivity, the national debt size, average life expectancy, unemployment rate, the number of the citizens who are living below the poverty line, etc. Still there is an index of happiness, the hedonistic index and the index of true progress.

All these indexes anyway display changes in consciousness of modern society which is guided by satisfaction of needs of the person more and more, but not abstract digits of economic growth. They can add traditional GDP, but replace with themselves such aggregated indicator as a gross internal product, as of 2019 while is hardly able.

See Also