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MEASUREMNTS OF PER CAPITA INCOME - Coggle Diagram
MEASUREMNTS OF PER CAPITA INCOME
GNI or GDP
Reasons to use
Easily available indicators that are calculated for most countries in the world
Closely correlated with other, non monetary measures of the quality of life (life expectancy at birth or mortality rates for children)
Higher the value, the larger the service sector is likely to be
They reflect the average income in a country and take into account the cost of living
Not useful indicators on their own, so allowance must be taken for the population size
Therefore, GNI or GDP must be used at purchasing power poverty (PPP)
Drawbacks
The necessary data are often incomplete, unreliable or not available
Accounting conventions are not necessary appropriate
In most poor countries, there is a large subsistence sector
Tells nothing about the distribution of income
No account is made of population of a country or its age profile
Significant problems arise when international comparisons of income are made
If poor countries artificially maintain an overvalued exchange rate, it will overestimate the income of the country expressed in US Dollars
However, many goods and services in poor countries are not traded and hence have no impact on the exchange rate
Many necessities of life in poor countries are very low priced in dollar terms
2018 Burundi US$280 whilst Switzerland US$83,580
In theory, people in Burundi are living on 7 cents a day which is untrue
Purchasing Power Poverty
Refers to the quantity of the currency needed to purchase a given unit of a good, or a common basket of goods and services
Means equalising the purchasing power of two currencies by taking into account the determinants
Therefore, PPP is an attempt to measure the true value of a currency in terms of the good or service it will buy
Determined by
Relative cost of living
Inflation rates in different countries
An index of human development
Measures the literacy and life expectancy in addition to income
This is obtained by
A long a healthy life (reflection of life expectancy at birth)
Education (measured by the index of mean actual/finished and expected/not finished years of schooling)
Access to resources (GNI per capita at PPP)
This ranges from 1 - 0 (with 1 being the highest level of human development)
This does not include:
important indicators such as gender or income inequality
More difficult measures such as respect to human rights or political freedom
Human poverty index
An attempt to bring together in a composite index the different dimensions of deprivation in the human life
This draws attention to:
longevity
Percentage of people not expected to survive to age 40
Knowledge
percentage of adults who are illiterate
A decent standard of living
Percentage of people without access to safe water
Percentage of people without access to health services
Percentage of moderately and severely underweight children aged under 5 years
and measures the extent of deprivation
Difference between HDI and HPI
HDI measures progress in a community or a country as a whole
HPI measures the extent of deprivation, the population of people not benefiting from the development process
Other measurements of economic development
The internet and mobile phone usage
Education
numeracy rate
percentage of children who attend school regularly
Levels of qualifications
Health provision