Gross domestic product (GDP) per capita

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What is this metric and why is it important?

Gross Domestic Product (GDP) is the monetary measure of everything that is produced in an economy in a given year. However, looking at GDP by itself is often skewed by the size of the country’s population, and so is not sufficient to measure how effective an economy is overall. This is addressed simply by dividing by population.

How is Canada doing?

  • Canada’s GDP per capita is $45,851 USD, compared to an OECD average of $44,662 USD.
  • From 1970 to 2019, Canada experienced  average growth of 1.56% per year, while the OECD overall experienced 2.46% annual growth.
  • Ontario has by far Canada’s highest GDP, making up 37.8% of total GDP. In per capita terms, however, the Northwest Territories is the highest at $75,575 USD followed by Nunavut at $70,952 USD and Alberta at $60,212 USD.

Metric discussion

There are three primary methods for measuring GDP: the production approach, the expenditure approach, and the income approach. All three focus on measuring the value added in a country. For example, if a country imported wood to build some houses and we were trying to determine the contribution of those houses to GDP, we would not want to include the value of the wood because the country did not put in the work to produce it. We use here the most common method, the expenditure approach, which combines consumption, investment, government spending, and net exports.

We account for cost of living by adjusting in terms of a country’s purchasing power parity. We adjust for inflation by picking a base year of 2015 and reporting our numbers in US dollars of that year. Finally, to achieve GDP per capita we divide by the population of the country. 

Limitations

GDP measures a very specific thing, and caution should be used when trying to glean a broader narrative from it. For example, GDP is often used to determine a country’s general well-being, which it is not designed to do. It does not capture happiness, the distribution of output, or any outcomes from economic activity that create negative value for society.

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