6 Conclusion
This paper has examined issues associated with measuring economic growth and the international ranking of countries by real GDP per capita. Section 2 illustrated that New Zealand’s international ranking depends to some extent on the data source used. While each data source produced a picture of a falling ranking over time, different data sources do influence the timing of falls and consequently may support different theories as to the major events contributing to such falls.
Section 3 examined the differences between various approaches to measuring the average growth rate over a period. The weighting system underlying growth rates estimated by OLS can lead to results that differ significantly from other techniques. The OLS technique is not appropriate when the log of real GDP per capita series contains a unit root. All the New Zealand series used in this paper contained a unit root, suggesting that the use of the OLS approach is inappropriate when using New Zealand data. At the very least it is important that people disclose the technique used in constructing a growth rate.
Section 4 focused on the impact of different data construction techniques on measured growth rates. It highlighted that knowledge of how data has been constructed is important as data construction can potentially have important implications for the measurement of real GDP and its associated growth rates. Changes in construction techniques over time do hinder the consistency of growth rate measures across time for New Zealand. This is also likely to be the case for most other countries, making international comparisons difficult. Large amounts of effort and resources have been expended in trying to make the construction of GDP measures as consistent as possible across countries. While this effort is extremely valuable, rankings of countries should still be treated with caution. This is particularly so when GDP per capita is being used as a proxy for living standards across countries.
Section 5 illustrated that New Zealand’s average growth rate for a period can be very sensitive to the endpoints used. This needs to be borne in mind when statements are made comparing the average growth rate for one period to another. To be credible, the analysis behind such statements needs to consider whether the comparison changes significantly when relatively minor changes are made to the time periods for which the growth rates are being compared. The tables included in section 5 and the appendices provide an accessible documentation of New Zealand’s historical growth performance as suggested by several different real GDP per capita series.
