Level and growth rate of per capita GDP

• In terms of level and rate of change of economic growth the performance across EU countries and regions is remarkably different.

• Level of per capita GDP (expressed in Purchasing Parity Standards) in 2010

• Change of per capita GDP 2000-2009 (before the 2008 crisis)

• Change of per capita GDP 2008-2010 (after the 2008 crisis)

1

Purchasing Parity Standard (PPS)• In order to compare the GDP per capita of different

countries data must be:

– converted in a common currency (by means of exchange rates)

– converted in a common purchasing power (by taking into account the different prices of a basket of typical goods and services)

• “The use of PPS series rather than the euro-based series tends to have a levelling effect, as those regions with very high GDP per inhabitant in euro terms also tend to have relatively high price levels (for example, the cost of living in central Paris or London is generally higher than the cost of living in rural areas of France or the United Kingdom).” Eurostat regional yearbook 2012 (page 28)

2

3

“Calculations for GDP per inhabitant that are based on PPS series instead of euro series can result in considerable differences when ranking regions. For example, in 2009, the Swedish region of Ostra Mellansverige was recorded as having a GDP per inhabitant of EUR 26.600, ranking above the Italian region of Marche, with EUR 25.600. However, in PPS terms, Marche, at 24.600 PPS per inhabitant, was above of Ostra Mellansverige, at 23.800 PPS.”

Eurostat regional yearbook 2012 (page 28)

4

Nomenclature of territorial units for statistics – NUTS (Statistical Regions of Europe)

5

6

7

8

Decomposition of per capita GDP

Population

Employment*

Employment

GPD

Population

GPD

Population

PopulationAge Working *

PopulationAge Working

Employment*

Employment

GPD

Labor Productivity (per person employed)* Employment Rate*Dependency rate

Working Age Population: 16-64 (Eurostat definition)

9

Population

PopulationAge Working *

PopulationAge Working

Employment

*Employment

Worked Hours Total*

Worked Hours Total

GPD

*

Decomposition of per capita GDP

Labor Productivity (per hour worked)* Work-Leisure Ratio*Employment Rate*Dependency rate

10

From levels to growth rates• GDP at constant prices. For computing growth

rates the GDP in Purchasing Parity Power should not be used (because the level of prices may change differently between countries)

• Annual rate of change: (GDPt1-GDPt0)/GDPt0 or natural logarithmic difference, that is ∆lnGDP= lnGDPt1- lnGDPt0

• Decomposition of growth rates:

∆ln(GDP/Population)= ∆ln(GDP/Employment) + ∆ln(Employment/Population)

From levels to growth ratesAnnual rate of change in a given period: more informative than the total variation between the initial and the final year – Mean of the annual rates of changes (or mean of

the annual log differences)

– Compound annual growth rate: requires only data for the initial and final year

– Linear regression of the natural log of GDP at constant prices on time (uses all the annual information; it is suitable when the period of time considered is sufficiently long)

11

  1996 1997 1998 1999 2000

Average 1995-2000

EU (15 countries)

GDP 1.7 2.7 2.9 3.0 3.8 2.8

Employment 0.6 1.1 1.8 1.9 2.2 1.5

Labour productivity 1.1 1.6 1.1 1.1 1.6 1.3

GDP, employment and productivity: percentage change on previous year

12

13

R&D intensity (total expenditures on GDP)

Annual average growth (compound)

  2012 2020 2012-2020Finland 3.55 4.00 1.50Germany 2.98 3.00 0.08Austria 2.84 3.76 3.57Slovenia 2.80 3.00 0.87France 2.29 3.00 3.43EU28 2.07 3.00 4.75Spain 1.30 2.00 5.53Hungary 1.30 1.80 4.15Italy 1.27 1.53 2.36Poland 0.90 1.70 8.27Romania 0.49 2.00 19.22

Compound annual growth rate= [(Rdint20/Rdint12)1/8 -1]x100