COMPARATIVE ECONOMIC STATISTICS:
NATIONAL INCOME AND THE STANDARD OF LIVING

I.    General Problems of statistical comparison

A.   Definitions and accounting standards

B.   Methods of data collection and secrecy

C.   Theoretical, methodological issues (index number problem)

 II.  Uses of Income Comparisons:

A.   As a measure of the standard of living (i.e., GDP per capita).

B.   As a measure of economic size or power (i.e., total GDP).

C.   As a denominator in ratios of trade dependency, debt burden, military spending, etc.

III. Value-Based National Income Concepts

A.   National Income Definitions

1.    Gross domestic product - Total value of all final goods and services produced in the country in a year, where "country" is defined a geographically.  Now the standard concept used by the United Nations, in its standardized System of National Accounts, by the EC, and by most individual countries, including the U.S. 

2.    Gross national product/income - GNP or GNI - Similar to GDP, but "nation" includes residents in the country for at least 6 months.  Formerly used by U.S. Commerce Department. 

The difference between GNP and GDP is large in countries that pay or receive large incomes from international investments or remittances, and tends to be large in countries that are "tax havens" (income reporting homes for corporations that are producing elsewhere). Ireland is a special case. Many foreign companies have set up operations in Ireland, which already has relatively low taxes, with a controlling shell company located in an even more tax-free nation, taking advantage of Ireland’s regulations that specify that the controlling owner, rather than the resident company, is subject to tax. For this reason companies such as Google, Yahoo, Microsoft, Forest Labs, and many others channel license revenues and royalties through Irish subsidiaries. These royalties and revenues are largely excluded from the tax base in Ireland (source).

3.    Net material product - The total value, measured in final selling prices, of final material production (most services excluded), net of depreciation.  Was used by most socialist countries.  Soviet GNP was only about half the U.S. level, but NMP was about two thirds.

B.   Uncounted (and Overcounted) Income and Production

1.    Goods produced but not sold - Production by households for family consumption.  If counted, would increase income by 20-33% in U.S. and perhaps 40-50% in many developing countries.

2.    Underground, shadow, or second economy, black market, or informal sector - Production concealed to avoid taxation or regulation.  In socialist countries, the underground economy filled gaps in the plan. Tends to be larger in countries with weak institutions, high taxes and regulations, and limited formal emloyment opportunities. Because it is intentionally hidden, its size is not known accurately, but its difference from measured GDP can be estimated in several ways, including monetary circulation, electricity consumption, lights seen at night in outer space, survey methods, discrepencies in national income accounts, and multiple-indicator methods, such as the one used to compile the following table.

3.    Overcounting - Exaggeration - New (2022) high-quality research by Luis R. Martınez uses information from night lights visible in space to suggest that autocracies, with few checks/balances, overstate their economic growth rates, annually, by an average of 35%.

C.   Conversion of National Incomes to a Single Currency

1.    Official or market exchange rates - In socialist countries, prices and exchange rates were set by central planners.  In market economies, rates are influenced by government intervention and market fluctuations.

2.    Atlas Method - Three-year adjusted average of market rates to reduce effects of year-to-year exchange fluctuations

3.    Purchasing power parity (PPP) - U.N. International Comparison Project revalues production in "international dollar" prices. Significantly increases relative sizes of GDPs for most low-income countries.

Converting GNI per capita to Dollars: Three Methods Compared, 2021
Economy	Ex. Rate	Atlas	PPP
Singapore	64023	64010	102450
Qatar	65811	62310	100450
Norway	93058	83880	82840
Ireland	76015	76110	79370
Switzerland	91627	90600	75810
Macao	44953	46450	72940
Hong Kong	53358	54460	70600
United States	71159	70930	70480
Denmark	70360	68300	66720
Netherlands	56473	55200	63370
Sweden	62777	59540	61090
Germany	53020	51660	59630
Finland	54664	53510	55940
Australia	59773	57170	55660
Canada	51618	48310	51690
France	44948	44160	51660
UK	46307	44480	49420
Korea, Rep.	35387	35110	47770
Italy	36296	35990	46450
Japan	40812	42650	44570
Czechia	25621	24430	43360
Russia	12100	11610	32070
Mexico	9781	9590	19740
China	12442	11880	19160
Iran	4105	3530	16540
Brazil	7305	7740	15600
Ukraine	4454	4120	13860
Egypt, Arab Rep.	3585	3350	12320
India	2221	2150	7130
Nigeria	1986	2080	5200
Kenya	2051	2080	5130
Ethiopia	920	940	2530
Niger	601	590	1330
Mozambique	482	480	1320
Somalia	445	430	1240
Congo, Dem. Rep.	542	550	1110
Central Af. Rep.	493	480	980
Burundi	222	220	780
Source: World Bank, World Development Indicators

D.   Index number problem - Results of comparisons are affected by price weights.  According to the Gerschenkron Effect, the GNP (or other production/consumption aggregate) of country X will appear relatively larger if the prices of country Y are used to sum the products of each country.

IV. Alternative Measures of the Standard of Living

A.   National income per capita - see above.

B.   Human Development Index (HDI) - Developed by the United Nations Development Program, and published in its annual Human Development Report.  Similar in some respects to PQLI, it includes three components: health (life expectancy), educational attainment (mean of years of schooling for adults older than 24 and expected years of schooling for children of school entering age), and access to resources (GNI per capita at purchasing power parity, measured on a logarithmic scale to reflect diminishing returns from income).

C.   OECD Better Life Index - Developed by OECD, this is perhaps the broadest of all of the synthetic indices, because it has eleven components: Housing, Income, Jobs, Community, Education, Environment, Civic Engagement, Health, Life Satisfaction, Safety, and Work-Life Balance. However, because it requires such a variety of data, it's available for only 41 countries (mainly those that are members of OECD) and many of the data are missing for those. The interactive web site is available here and the underlying data are available here.  Currently, with equal weights for the indicators, the top ranking countries are Norway, Iceland, Switzerland, and Sweden. Among the 41 covered countries, the lowest scores go to South Africa, Colombia, Mexico, and Turkey.

D.   Happy Planet Index - Originally developed by the New Economics Foundation in the UK, and now maintained by the Wellbeing Alliance,this index focuses on life expectancy (LE), survey-based life satisfaction (LS), and "ecological footprint" (EF, the average amount of land needed, per head of population,to sustain a country consumption patterns and CO2 emissions). The formula is roughly (LE x LS)/EF .  This leads to a VERY different set of country rankings than those related to GDP, HDI, or "Better Life."  By the sustainability-based Happy Planet ranking, Costa Rica, Vanuatu, and Colombia are at the top of the 2019 list, and Norway drops to number 38. China is ranked 94th and the USA is ranked 122nd.

E.   Survey-Based Wellbeing - Many options are available here, including the one included in the Happy Planet Index. However, an interesting new study from David Blanchflower of Dartmouth College and Alex Bryson of University College London (IZA, December 2022) draws data from Gallup World Poll and the US Daily Tracker Poll, combining four positive affect measures - life satisfaction, enjoyment, smiling and being well-rested – and four negative affect variables – pain, sadness, anger and worry, pooling over 2008-2017 for an especially broad measure. According to this ranking, people in Hawaii, Minnesota, and a few other U.S. states are more satisfied than people on average in any other country. Outside of the U.S., the happiest places are Taiwan, Austria, and the Netherlands. The U.S. ranks 150th on the full list. The least satisfied Americans, by their measure, are in West Virginia, and the least satisfied countries in the world are said to be Iraq, South Sudan, Armenia, Togo and Central African Republic.

Human Development Index and its components
		Human Development Index (HDI)	Life expectancy at birth	Expected years of schooling	Mean years of schooling	Gross national income (GNI) per capita
HDI rank	Country	Value	(years)	(years)	(years)	(2017 PPP $)
		2021	2021	2021	2021	2021
1	Switzerland	0.962	84.0	16.5	13.9	66,933
2	Norway	0.961	83.2	18.2	13.0	64,660
3	Iceland	0.959	82.7	19.2	13.8	55,782
4	Hong Kong	0.952	85.5	17.3	12.2	62,607
5	Australia	0.951	84.5	21.1	12.7	49,238
6	Denmark	0.948	81.4	18.7	13.0	60,365
7	Sweden	0.947	83.0	19.4	12.6	54,489
8	Ireland	0.945	82.0	18.9	11.6	76,169
9	Germany	0.942	80.6	17.0	14.1	54,534
10	Netherlands	0.941	81.7	18.7	12.6	55,979
11	Finland	0.940	82.0	19.1	12.9	49,452
12	Singapore	0.939	82.8	16.5	11.9	90,919
18	United Kingdom	0.929	80.7	17.3	13.4	45,225
19	Japan	0.925	84.8	15.2	13.4	42,274
19	Korea (Republic of)	0.925	83.7	16.5	12.5	44,501
21	United States	0.921	77.2	16.3	13.7	64,765
22	Israel	0.919	82.3	16.1	13.3	41,524
27	Spain	0.905	83.0	17.9	10.6	38,354
28	France	0.903	82.5	15.8	11.6	45,937
30	Italy	0.895	82.9	16.2	10.7	42,840
35	Saudi Arabia	0.875	76.9	16.1	11.3	46,112
52	Russian Federation	0.822	69.4	15.8	12.8	27,166
66	Thailand	0.800	78.7	15.9	8.7	17,030
76	Iran	0.774	73.9	14.6	10.6	13,001
77	Ukraine	0.773	71.6	15.0	11.1	13,256
79	China	0.768	78.2	14.2	7.6	17,504
86	Mexico	0.758	70.2	14.9	9.2	17,896
97	Egypt	0.731	70.2	13.8	9.6	11,732
106	Palestine, State of	0.715	73.5	13.4	9.9	6,583
117	Botswana	0.693	61.1	12.3	10.3	16,198
120	Venezuela	0.691	70.6	12.8	11.1	4,811
121	Iraq	0.686	70.4	12.1	7.9	9,977
132	India	0.633	67.2	11.9	6.7	6,590
163	Nigeria	0.535	52.7	10.1	7.2	4,790
175	Ethiopia	0.498	65.0	9.7	3.2	2,361
183	Yemen	0.455	63.8	9.1	3.2	1,314
184	Burkina Faso	0.449	59.3	9.1	2.1	2,118
185	Mozambique	0.446	59.3	10.2	3.2	1,198
186	Mali	0.428	58.9	7.4	2.3	2,133
187	Burundi	0.426	61.7	10.7	3.1	732
188	Central African Republic	0.404	53.9	8.0	4.3	966
189	Niger	0.400	61.6	7.0	2.1	1,240
190	Chad	0.394	52.5	8.0	2.6	1,364
191	South Sudan	0.385	55.0	5.5	5.7	768

Alternative Rankings of Living Standards
	GNI PPP 2021	HDI 2021	Well-being 2008-2017	Happy Planet 2019
Singapore	1	12	19	66
Qatar	2	41	76	113
Luxembourg	3	16	22	142
Ireland	4	8	9	34
Switzerland	5	1	6	3
United States	6	20	91	121
Norway	7	2	4	37
Hong Kong	8	4	27	137
United Arab Em.	9	25	17	134
Denmark	10	6	11	68
Netherlands	11	10	2	17
Iceland	12	3	3	51
Germany	13	9	18	28
Sweden	14	7	8	40
Austria	15	24	1	58
Kuwait	16	47	49	139
Belgium	17	13	38	88
Finland	18	11	14	32
Australia	19	5	21	84
Canada	20	15	20	101
Saudi Arabia	21	36	69	93
France	22	27	65	30
United Kingdom	23	17	55	13
Korea (Rep. of)	24	19	37	106
New Zealand	25	14	13	10
Italy	26	29	83	39
Japan	27	18	10	56
Israel	28	21	97	48
Slovenia	29	23	68	52
Bahrain	30	34	107	138
Malta	31	22	93	82
Czechia	32	31	66	57
Spain	33	26	73	29
Cyprus	34	28	101	44
Estonia	35	30	54	132
Lithuania	36	35	106	124
Portugal	37	37	82	112
Poland	38	33	59	111
Latvia	39	38	84	135
Hungary	40	43	109	67
Türkiye	41	45	118	98
Slovakia	42	42	87	60
Croatia	43	39	88	63
Romania	44	49	127	62
Greece	45	32	115	46
Russia	46	48	35	130
Panama	47	55	12	5
Malaysia	48	56	24	91
Chile	49	40	75	65
Kazakhstan	50	50	30	117
Trinidad & Tobago	51	51	33	143
Bulgaria	52	62	99	102
Mauritius	53	58	64	31
Uruguay	54	53	36	9
Argentina	55	44	42	42
Montenegro	56	46	121	97
Costa Rica	57	52	28	1
Serbia	58	59	138	25
Belarus	59	54	80	85
Dominican Rep.	60	69	105	18
Mexico	61	73	29	22
China	62	68	7	90
Thailand	63	60	5	27
Botswana	64	95	74	141
N. Macedonia	65	67	108	79
Libya	66	85	114	87
Bosnia & Herz.	67	64	128	53
Moldova	68	70	131	36
Georgia	69	57	116	75
Colombia	70	75	50	2
Brazil	71	74	85	20
Azerbaijan	72	77	104	49
Albania	73	61	120	35
Gabon	74	90	137	105
Ukraine	75	66	124	99
Armenia	76	72	148	19
Turkmenistan	77	78	63	140
Iran	78	65	143	81
South Africa	79	88	26	128
Sri Lanka	80	63	46	59
Paraguay	81	86	16	54
Peru	82	71	102	14
Egypt	83	81	145	83
Indonesia	84	92	23	43
Algeria	85	76	92	61
Mongolia	86	80	25	149
Ecuador	87	79	56	4
Tunisia	88	82	123	78
Iraq	89	99	149	69
Jordan	90	84	122	80
Lebanon	91	91	129	115
Bhutan	92	104	45	126
Philippines	93	94	78	11
Jamaica	94	89	89	6
Guatemala	95	108	51	7
Namibia	96	110	72	125
El Salvador	97	102	60	12
Bolivia	98	96	117	72
Uzbekistan	99	83	15	23
Viet Nam	100	93	32	47
Laos	101	111	41	86
Eswatini	102	113	44	129
Morocco	103	101	86	38
India	104	106	111	127
Palestine	105	87	146	41
Ghana	106	107	67	109
Nicaragua	107	103	71	15
Bangladesh	108	105	95	21
Honduras	109	109	58	8
Côte d'Ivoire	110	123	130	107
Mauritania	111	122	47	131
Venezuela	112	98	31	45
Nigeria	113	128	52	136
Pakistan	114	125	134	71
Kyrgyzstan	115	97	39	24
Tajikistan	116	100	57	16
Kenya	117	118	34	70
Cambodia	118	114	119	50
Nepal	119	112	113	26
Myanmar	120	116	77	103
Zimbabwe	121	115	62	147
Cameroon	122	117	126	104
Sudan	123	135	112	108
Benin	124	130	139	95
Senegal	125	134	48	33
Zambia	126	120	96	133
Comoros	127	121	70	89
Congo-Brazzaville	128	119	132	55
Haiti	129	127	140	118
Lesotho	130	132	90	148
Tanzania	131	124	53	123
Guinea	132	142	135	119
Ethiopia	133	137	79	92
Rwanda	134	129	43	114
Uganda	135	131	40	73
Togo	136	126	147	122
Mali	137	146	61	110
Burkina Faso	138	144	133	94
Afghanistan	139	140	125	145
Sierra Leone	140	141	144	146
Madagascar	141	136	100	77
Malawi	142	133	81	116
Chad	143	149	136	144
Yemen	144	143	141	74
Liberia	145	138	142	64
Niger	146	148	98	96
Mozambique	147	145	110	76
Congo DR-Kinshasa	148	139	103	100
Burundi	149	147	94	120
Sources and Measures: GNI (in 2017 PPP $) and HDI from U.N. Development Programme, hdr.undp.org; Wellbeing from David G. Blanchflower and Alex Bryson, “Wellbeing Rankings,” IZA 12/2022; and Happy Planet from happyplanetindex.org.