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el freako
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Bristol, European Union
Oct 1999
time: 05:25
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quote:
Originally posted by Lawrence of Arabia
1. so first you took EKS PPP, which is a productivity/GDP number |
Err, no it's not it's a normal PPP - nothing to do with productivity.
It's the PPP measure used by the OECD, they switched from the older GK method in 1990.
quote:
Originally posted by Lawrence of Arabia
2. where did you get the OECDs estimate for output gap, and what formula did you use to adjust it? |
From the OECD Economic Outlook no.76, you can download the annex tables here (listed as Demand and Output: EO76 Annex Tables - the estimate of the output gap is in the last tab in the workbook)
To convert GDP to 'trend gdp' I used the formula GDP/(1+output gap percentage)
quote:
Originally posted by Lawrence of Arabia
3. where did you get net property income from abroad, and in what way did you add it. |
Again from the OECD, use the same page and follow the link 'Annual National Accounts for OECD Member Countries - Data from 1970 onwards' - you want section 4a 'Disposable Income, Saving and Net Lending/Borrowing', the variable is called 'Net primary incomes from the rest of the world'
quote:
Originally posted by Oerdin
I find it highly suspicious that they choice the end date of 2002, when the US was in recession, to make their comparison. Why not do a ten year comparison between 1990-2000 or use the latest numbers available 1990-2004? Unless of course there is something to hide and someone is trying to make one party look good and another party look bad? |
The reason I chose 2002 was because the PPPs are only calculated triennially (i.e. in 1990, 1993, 1996, 1999 and 2002) so I cannot use the 2000 data without compomising the comparability of the series.
This is the main reason I use the OECD's estimates of the output gap to correct for the effects of the economic cycle.
Last edited by el freako on 11-03-2005 at 01:32
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Flubber
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With a view of the Rockies
Aug 2000
time: 22:25
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quote:
Originally posted by el freako
Secondly my main task is to have the numbers as comparable to each other as possible, which is why I corrected for the economic cycle.
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You say that "you" corrected for the economic cycle. How exactly??
If a country had growth during the entire period that was lower than historical averages would this be corrected as a long recession or would some of it be corrected or none??
I don't dispute that Europe may have "gained" on the US since there were some weaker economies that had more room to grow in a sense. But I am intrigued by what methodology would be used in a measure of economic performance to correct for ups and downs in economic performance
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Flubber
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With a view of the Rockies
Aug 2000
time: 22:25
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quote:
Originally posted by DanS
Don't get me wrong. I'm not questioning that ef is trying to get at the correct figures and that he's in the right ballpark. I just think that the fudge factor is a little too large to come to such precise conclusions. |
Likewise I don't question his intent, just wonder as the the methodology
How would the numbers differ if you had not adjusted them? ( I am not saying the unadjusted numbers are more reflective, again just curious as to how things were done)
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el freako
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Bristol, European Union
Oct 1999
time: 05:25
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quote:
Originally posted by Flubber
How would the numbers differ if you had not adjusted them? ( I am not saying the unadjusted numbers are more reflective, again just curious as to how things were done) |
Not too much for the EU as a whole (the change in the output gap was of a similar magnitude in 1990-2002 as in the US)
GNI per head as % of US level, 2002 1990
Canada: 80% 76%
United States: 100% 100%
Australia: 77% 68%
Japan: 77% 77%
New Zealand: 59% 55%
Austria: 81% 71%
Belgium: 80% 72%
Denmark: 82% 71%
Finland: 76% 68%
France: 79% 75%
Germany: 73% 70%
Greece: 52% 41%
Ireland: 75% 46%
Italy: 73% 67%
Netherlands: 81% 70%
Norway: 101% 73%
Portugal: 51% 41%
Spain: 62% 50%
Sweden: 77% 72%
Switzerland: 94% 95%
United Kingdom: 81% 68%
European Union (15): 74% 66%
While I was at it I also calculated productivity figures as well:
GDP per hour worked, US=100% 2002 1990
Canada: 83% 81%
United States: 100% 100%
Australia: 83% 75%
Japan: 75% 68%
New Zealand: 65% 65%
Austria: 102% 84%
Belgium: 114% 99%
Denmark: 98% 84%
Finland: 92% 74%
France: 120% 110%
Germany: 102% 83%
Greece: 65% 49%
Ireland: 106% 70%
Italy: 96% 90%
Netherlands: 109% 105%
Norway: 132% 98%
Portugal: 54% 41%
Spain: 77% 74%
Sweden: 89% 79%
Switzerland: 91% 88%
United Kingdom: 90% 76%
European Union (15): 96% 84%
Last edited by el freako on 11-03-2005 at 10:11
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Maniac
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Gent, Belgium
Jul 1999
time: 06:25
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I was a bit surprised after reading this thread. Just this week I saw figures that Europe was the slowest growing region in the whole world.   So how can this difference with your numbers be explained? In an attempt to understand, I have some questions. I know little about economics, so please forgive me if I ask stupid questions.
First, what's the difference between Gross Domestic Product (GDP) and Gross National Income (GNI)? From what I read in this thread, am I correct it's the following?:
1> Gross National Income counts the incomes from people with the nationality of the countries you mention. So a Belgian living in the USA all his life would be included in the Belgian GNI instead of the US GNI.
2> As GNI is measuring income and not domestic production, a Belgian gaining income from having stocks in a company located in China would count as Belgian GNI.
3> GNI counts "beschikbaar inkomen". "Disposable income" in English I think, meaning available income you can spend directly after taxes are deducted?
As much as I would like the EU to grow fast of course, If the above three assumptions are correct, I'm questioning whether your research can be used as evidence the EU is doing well, as you seem to say in this thread.
Consider:
1> You can hardly consider a eg Belgian living in the US all the time as good for the Belgian economy. That's why GDP is used more than GNP these days AFAIK.
2> If getting income from stocks of a China-located company counts as national income, once again this would not seem a good indicator of a country's economic performance. After all I assume GNI is the sum of all incomes of all national citizens of a country. In that case relocating a factory from Europe to China where there are lower wages could increase profit levels and thereby increasing the incomes of the couple European-national stockholders of that company. However at the same time the factory relocation would mean lots of people in Europe would lose their job and income... Not good for Europe... Not good at all. Especially if the European-national China-company stockholders don't invest their extra income in the European economy, but continue to invest in low wage countries.
So do you have some figures how income is divided within the countries? If the above scenario is true, the income of a small elite would increase, while the income of the general population would decrease.
3> If GNI is measuring disposable income, how do you deal with the effect of govnerments increasing or decreasing tax levels? This would artificially change the GNI of a country, saying nothing about its economic performance.
How do the incomes figures between the US and Europe look btw if you count 'free' government services paid with the taxes (eg cheap healthcare, education, public transport...) as part of the income? At university I got a pro-American professor who claims the USA is the land of milk and honey, and who says the American poor are richer than the European poor. When we students asked a little further about it, it appeared he was only counting disposable income, so not including all the social security benefits people get here in Europe. 
Anyway, I hope you can shed some light on my questions, or point out major reasoning mistakes I made. Again, while I would love your analysis to be true, I fear Fez may in fact be right here for a change: Europe is going dooooooown!!! (Though that doesn't mean we should follow Fez' ideas to solve that problem  )
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el freako
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Bristol, European Union
Oct 1999
time: 05:25
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quote:
Originally posted by Maniac
First, what's the difference between Gross Domestic Product (GDP) and Gross National Income (GNI)? From what I read in this thread, am I correct it's the following?: |
GNI is GDP plus net primary incomes from the rest of the world, these are mainly profits of multinational companies remitted home and also the remittances of workers.
Countries with net foreign assets usually have a positive net primary income.
quote:
Originally posted by Maniac
1> Gross National Income counts the incomes from people with the nationality of the countries you mention. So a Belgian living in the USA all his life would be included in the Belgian GNI instead of the US GNI. |
Nope, this is not correct - in fact as GDP is measured mainly using company estimates of their value added it would be nigh-on impossible even to compile this data.
The way in which the above mentioned Belgian worker could countribute to belgian GNI is to send money home (to his/her relatives for example) or to found a US subsidiary of a Belgian company which will send some of it's profits back to Belgium.
quote:
Originally posted by Maniac
2> As GNI is measuring income and not domestic production, a Belgian gaining income from having stocks in a company located in China would count as Belgian GNI. |
That would count towards Belgian GNI as it is profits remitted from China to Belgium
quote:
Originally posted by Maniac
3> GNI counts "beschikbaar inkomen". "Disposable income" in English I think, meaning available income you can spend directly after taxes are deducted? |
Nope, there is no consideration of taxes.
GNI is is the income of the nation as a whole, individuals corporations and government etc.
quote:
Originally posted by Maniac
How do the incomes figures between the US and Europe look btw if you count 'free' government services paid with the taxes (eg cheap healthcare, education, public transport...) as part of the income? |
The simple answer is I don't know - it's difficult to put a price on these services as they differ greatly from nation to nation.
I remember reading a study that said that if you count this and the extra leisure-time that europeans enjoy then their income is only 5% to 10% lower than american's.
The simple answer to your question is that the US and Europe calculate both GDP and inflation (which is used to calculate growth rates) differently.
Firstly the US uses a 'hedonic' deflator in it's GDP measures - this attempts to capture improvements in quality (for example the PC you buy today hasn't dropped a lot in price from that 10 years ago but it is vastly more advanced) - when the US switched to hedonic deflators in 1997/98 they reported inflation around 0.5% a year lower than using the previous measure, as growth is directly calculated from these deflators this also had the effect of raising the US's reported growth rate by 0.5% a year.
Whilst hedonic delfators are probably superior to the older method it does make comparisons difficult between those countries using them (the US, France and Australia) and those not (everyone else).
Secondly the US treats business purchases of software as a business investment (which is included in GDP) wheres most other nations treat it as a business expense (which is not).
Business purchases of software make the US's reported GDP nearly 2% larger and contributed 0.2% a year to growth in 1990-2000.
These differences in methodology make direct comparisons of growth rates difficult, which is why I use the current-price GDP converted using the PPP's of the day (this also has problems as PPPs can also be inaccurate, so I don't use this for comparisons of a shorter time period than 6 years).
In 1990 the EU15 had a combined GDP which was 97.4% of the US level - using the reported growth rates that should have fallen to 87.0% by 2002, however when it was measured using PPPs it it was 97.8% - a difference of 1% a year - now this might have been due to inaccuracies in the PPP's in 1990 and 2002 - however the same 1% a year gap shows up when looking at the latest set of PPP's (2002) compared with the previous ones (in 1999 EU15 GDP was 94.7% of the US level and should, according to reported growth rates, have risen only to 94.9% in 2002 - not the 97.8% recorded)
This discrepancy shows up again and again - if you look back at articles written in the late 1990's they lamented that 'Europes incomes have been stuck at 65% of the US level since 1970', today you can get similar arguments saying that European incomes have been stuck at 70% to 75% of the US level since 1970 - these arguments are made because people are relying on the growth rates to be strictly comparable between the US and Europe, but as we have seen they are not.
In fact I fully expect to see articles in a decade's time bemoaning the fact that 'Europe's income has been stuck at 80% of the US's level since 1970' unless the growth figures become much more comparable.
A lot of Europe's supposed 'stagnation' is just a statisical illusion - this is not to say that we should not attempt to reform and deregulate our economies, if we have equalled the US's growth rate with our economies bound by so much regulation just imagine what we could achieve if they were set free.
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11-03-2005 01:26
sometimes I think Fez is really Markos trying to amuse members of this site. Thank you, Markos 
great marketing 
Liberals can rant all about the goods of free market all they want, but I don't think it's positive that foreign companies compete European enterprises out of the market not because they provide better quaility products, but because they pay their employees less and have less strict environmental laws. 
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