Productivity and GDP of nations
Studying for my upcoming economics test prompted me to write about productivity. Productivity is the amount of output per hour of labor. Gross domestic product is the value of final goods and services produced. GDP and productivity have a positive relationship, generally the greater the productivity growth, the greater the per capita GDP is. Industrialized countries usually have a fairly high productivity level and therefore have a high per capita GDP and standard of living. Developing nations have a lower productivity level because they don’t have a large supply of equipment, tools, educated and experienced workers, and technology. Since their workers aren’t especially productive, these nations do not have a lot of goods to sell or trade for, and their citizens have a fairly low standard of living. U.S. citizens have a per capita GDP of about $40,000 per year, which is the third highest in the world. Many African nations have a per capita GDP of much less than $1,000 per year.
The governments of developing nations can do several things to help the people of their country to boost productivity. Govenments should promote property rights and political stability. Political stability encourages foreign investors to buy capital, and thus provide resources that will help the developing nation to increase their capital stock. Governments should try to trade with other countries, because an even an unproductive country can have a comparative advantage in trading a certain good. Encouraging education will result in more skilled workers who may have new ideas about production. Although this may seem far fetched in the U.S., in less developed nations should make an effort to have healthier workers. South Korea experienced extreme economic growth between the 1960’s and the 1990’s. During this time period it was discovered that the population consumed 44% more calories!
If developing nations make some of these changes, it could help bring their economies out of a viscious cycle and level the global playing field even more. Currently, nations such as China and India are experiencing the catch-up effect. Small amounts of capital investment substantially increased productivity and have helped the nation’s economic situation.
The figure at the top is a map of per capita GDP. The nations with the highest per capita GDP are colored blue, those with the lowest per capita GDP are colored orange and red. Nations with middle level GDP’s, such as Brazil, China, and Russia are colored yellow or green. source: http://www.answers.com/topic/list-of-countries-by-gdp-ppp-per-capita
Things That Prevent Productivity « Where Are We Going? said,
November 9, 2006 at 1:26 am
[...] I guess I must have been in a cynical mood because after reading Danika’s blog posting on productivity all I could think of were the things that prevent countries from being productive. There are many good ideas that would improve developing nations but there are still road blocks in the way. I am also not an expert in economics or have I taken a class in it (besides this one I suppose) so I apologize for any logical fallacies but constructive criticism is always helpful. [...]