Comparisons

On page 3 of the Sunday, June 17, 2007 issue of the Chicago Tribune, section 2, in an item titled "A Land of Plenty," (link no longer operative) an interesting graphic compared the individual state economies as measured by Gross State Product (GSP) with comparable national economies as measured by Gross Domestic Product (GDP). I went on the Trib's web site and found story, but no graphic. (And now the story doesn't seem to be available, either.) And there wasn't an easy way to make comparisons given the way the information was formatted. So the basic information is available from me, on request, in two formats. (.doc and .xls) The matches that were given are not exact. In most cases, the state was matched as closely as possible to nation. As a result, GSP may be higher or lower than the corresponding nation’s GDP by a significant amount, sometimes more than 10%.

An idea for activity follows in the extended entry:

Part I
One way we compare nations is by using a statistic called per capita GDP. This divides the nation’s output by the population, and gives a measure of the average amount of output per person. While this does not take into effect issues of distribution (wealth vs. poverty), it does provide a benchmark. Using the Census Bureau Quick Facts and the CIA Fact Books web sites, have your students compare per capita Gross State Product (GSP) for their state (or other states) with per capita Gross Domestic Product (GDP) for the corresponding country. How do they compare? What might account for the difference?

Part II
Once we’ve looked at per capita GSP and GDP it would appear to be quite simple to determine which location (state or country) is better off. But that’s too easy. We have to take into account that items may not cost the same in another country as they do in a given state in the U.S. That’s where Purchasing Power Parity (PPP) comes in. PPP is a way of adjusting the data to allow for differences in local prices, etc. It tells us whether we will be able to purchase as much or more or less at local prices in the country in question. A good popular example of PPP is the Big Mac Index published in the The Economist magazine.

However, that site may not contain information for all nations in this activity. Using the data on the CIA Fact Book site, how does the per capita GDP compare with your original calculations from part I? (Please notice not all PPP
data is for 2006).

Additional discussion: One issue that hopefully will come up in discussion with your students is productivity, i.e. how many hours of labor does it take to produce the output (GDP). One can find labor data for various nations (although it doesn’t appear to be as recent as 2006) on the United Nation’s web site for labor statistics.

For the country you’re interested in, just scroll down and select. You will then be asked to select date (2000 appears to be recent in many cases – one would hope the labor force has grown since then), and once you continue you will be asked for file type (html, csv, or xls). Unfortunately, I haven’t been able to find a central source for state labor hours – any suggestions would be welcome here.

One can also examine growth rates for GDP (and GSP). This issue is sometimes debated because other countries are growing more rapidly (during the 1990s, there was discussion of the “tigers” in Southeast Asia. However, one must then consider how a small percentage increase on a very large number can, in nominal terms, be better than a large percentage increase on a smaller number. Regardless, this can get your students thinking on a larger scale, and can provide some opportunities to direct study outside their zones of familiarity.

Comment back and share how this worked for you.

Posted by TSchilling at 9:52 AM Comments (0)