Why Net Domestic Product Should Replace Gross Domestic Product as a Measure of Economic Growth

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Roland Spant (2003)
  • Journal: International Productivity Monitor, volume 7, issue Fall, pages 39-43
  • Subject: Net Domestic Product, Alternative Growth Measurement, GDP, Depreciation, Capital Consumption, Service Life, Sustainable Growth, ICT, Information, Communication, Technology, Assets
    • jel: jel:O47 | jel:E22 | jel:O30

In the third article, Roland Spant, a Swedish trade union economist, argues that Net Domestic Product (NDP) should replace GDP as a measure of economic growth for a number of purposes. The key difference between GDP and NDP is depreciation. With the shift in investment toward information technology assets with relatively short service lives, the share of depreciation in GDP has increased in most OECD countries and GDP growth now exceeds NDP growth. Spant points out that this means that the use of GDP leads to the overestimation of real output growth as well as the potential for noninflationary real wage gains.
  • References (5)

    Baker, Dean (2001) “The New Economy Goes Bust: What the Records Shows,” October, Centre for Economic and Policy Research Briefing Paper, www.cepr.net/new_economy_goes_bust.htm.

    Denison, Edward (1985) Trends in American Economic Growth, 1929-1982 (Washington, D.C.: Brookings Institution).

    Hulten, Charles R. (1992) “Accounting for the Wealth of Nations: The Net versus Gross Output Controversy and its Ramifications,” Scandinavian Journal of Economics 94, Supplement 9-24.

    Landefeld, Steven J. and Fraumeni, Barbara M. (2001) “Measuring the New Economy,” Survey of Current Business, March, pp. 23-40.

    OECD (2002) Information Technology Outlook (Paris).

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