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The Danish GDP number you quote is based on the Danish Kroner to US Dollar exchange rate. This does not take into account the much higher cost of living in Denm

by spikels 13y ago

The Danish GDP number you quote is based on the Danish Kroner to US Dollar exchange rate. This does not take into account the much higher cost of living in Denmark. This is why it is generally preferred to use Purchasing Power Parity (PPP) to compare incomes across countries. This tells a very different story: Per Capita GDP (PPP) 2012 USA 51,704 USD Denmark 37,324 USD So after taking into account the much higher cost of living in Denmark the per capita GDP in the US is actually 38% higher! http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_... Edit: Accidentally hit submit before I was ready to post...

Retric 13y ago
Your numbers are even more in favor of Denmark. (Denmarks 51,704 USD vs USA 37,324 USD) so what's your point?
- spikels 13y ago
  Sorry to mislead you. Accidentally hit submit and had the USA and Denmark swapped. Numbers are correct now. Delete your post if you like...
dalke 13y ago
It's hard to use those as a firm ranking system. For example, it looks like it doesn't include health care, child care, family leave, and other things which are covered by taxes/employer social fees in Denmark but are out-of-pocket in the US. About $3,000 of that difference is health insurance. Better might be to ask Danes and Americans "are you happy with your life?" On one happiness scale, Danes are the happiest people in the world. http://unsdsn.org/files/2013/09/WorldHappinessReport2013_online.pdf http://unsdsn.org/files/2013/09/WorldHappinessReport2013_onl... . The US is #17.
- spikels 13y ago
  I would argue that PPP is better than exchange rate based comparisons and I think most experts agree.[1] GDP per capita includes everything produced by the country including health care, child care, etc. So that is not the issue here.[2] In the US only about a quarter of GDP is spent by the government while in Denmark about half is spent by the government.[3] So in the US we pay directly for some services like healthcare that in Denmark are paid through the government with taxes. [1] http://mruniversity.com/courses/development-economics/gdp-and-ppp http://mruniversity.com/courses/development-economics/gdp-an... [2] http://en.wikipedia.org/wiki/Gross_domestic_product http://en.wikipedia.org/wiki/Gross_domestic_product [3] http://en.wikipedia.org/wiki/List_of_countries_by_tax_revenue_as_percentage_of_GDP http://en.wikipedia.org/wiki/List_of_countries_by_tax_revenu...
  - judk 13y ago
    How does PPP work when healthcare is socialized in Denmark and I don't need to maintain a car, but I do need to lay for heat, etc?
    - spikels 13y ago
      Since you are so interested why don't you do a little research yourself. This has been extensively studied but I think you need to start with the basics. http://en.wikipedia.org/wiki/Purchasing_power_parity http://en.wikipedia.org/wiki/Purchasing_power_parity
  - dalke 13y ago
    Sorry, yes, I meant to agree that PPP is better than exchange rates. PPP is difficult because there is no international common basket of goods. Danes get 52 weeks of paid parental leave, of which 18 are to be taken by the mother, 2 weeks by the father, and the others split at the parent think is appropriate, and their job position is waiting for them when they return. What's the equivalent for the US? Some of the leave pay comes from the company. Some from the state. How does the 1 year of overall leave measured in the PPP? How much would it cost to get the same benefits in the US?
    - spikels 13y ago
      No need to apologize. I agree the PPP basket weights is a problem without a perfect solution but I has been studied extensively. My understanding is that most experts don't think it is a huge problem. I think most people would agree that Denmark is more expensive that the US but we can certainly argue about how much more expensive[1]. I'm not expert in the details of either GDP or PPP calculations but here is my understanding of how parental leave would be treated. It would show up in GDP because wages are included under the "income approach", one of the three main approaches used. I don't believe it would directly show up in PPP as it is not a good or service that people buy. I don't think is means anything to say parental leave is less or more expensive. Anyway I don't think it would have a big impact as there only about 50,000 births every year in Denmark in a population of 5.5 million. So if they max out the benefit it is only 25,000/5,500,000 = 0.45%. This is a good example why GDP and PPP work in practice - all these random errors tend to cancel out. If you are interested I suggest you read up on how GDP is calculated. The Wikipedia article if pretty good[2]. [1] http://www.numbeo.com/cost-of-living/compare_countries_result.jsp?country1=United+States&country2=Denmark http://www.numbeo.com/cost-of-living/compare_countries_resul... [2] http://en.wikipedia.org/wiki/Gross_domestic_product http://en.wikipedia.org/wiki/Gross_domestic_product
- judk 13y ago
  That survey doesn't factor in cultural brainwashing :-) You need to survey folks who have lived in both places.
- yummyfajitas 13y ago
  GDP includes government spending, so all the things you mentioned are included. You'd have a point if he provided statistics for post-tax wages (excluding benefits) or something like that.
_delirium 13y ago
PPP seems like a weird attempt to decide what the exchange rate "should" be for things to be "equivalent". Why not let the market decide? DKK vis-a-vis USD is a floating exchange rate, where the market can decide how much they think is equivalent. Obviously a house in Copenhagen costs more than one in Nebraska, but that's because it's a better product, just like a good car costs more than a cheap car, and a fine restaurant with ocean view costs more than a taco truck. You can even apply it within countries: the cost of living is higher in Half Moon Bay than Detroit, but that's because living in Half Moon Bay is actually more desirable in real terms, not because dollars in Half Moon Bay are somehow devalued.
- spikels 13y ago
  PPP was developed for exactly this purpose - to understand differences across areas with different currencies. While it is not perfect it attempts to take things like quality differences into account. Real estate if pretty difficult to compare as it is unique but for many other goods it is much easier. For example you mention cars. The almost identical VW Golf (know as a Rabbit in the US) cost more than twice as much in Denmark as in the US. http://www.numbeo.com/cost-of-living/compare_countries_result.jsp?country1=United+States&country2=Denmark http://www.numbeo.com/cost-of-living/compare_countries_resul...
  - _delirium 13y ago
    > The almost identical VW Golf (know as a Rabbit in the US) cost more than twice as much in Denmark as in the US. Yes, but the VW Golf is relevant in the U.S., and irrelevant in Denmark. In the U.S. you have to drive, and in Denmark you don't (and most people don't). The modal share of bicycle commuting in Copenhagen is >50%, because the bike infrastructure is good. I sold my car when I moved from the SF Bay Area to Copenhagen, and now I spend less on transportation, with a better quality of commute (in my subjective estimation). Yet PPP would probably claim transportation costs more! Besides the nice bike infrastructure, I have an unlimited-rides metro pass for $50/mo, which includes very good 24/7 service. How much would it cost me to buy 24/7 transportation in the SF Bay Area, where I don't have to drive the vehicle myself? (Night buses that come once an hour don't count.)

by spikels 13y ago

Retric 13y ago

Your numbers are even more in favor of Denmark. (Denmarks 51,704 USD vs USA 37,324 USD) so what's your point?

spikels 13y ago
Sorry to mislead you. Accidentally hit submit and had the USA and Denmark swapped. Numbers are correct now. Delete your post if you like...

dalke 13y ago

It's hard to use those as a firm ranking system. For example, it looks like it doesn't include health care, child care, family leave, and other things which are covered by taxes/employer social fees in Denmark but are out-of-pocket in the US. About $3,000 of that difference is health insurance. Better might be to ask Danes and Americans "are you happy with your life?" On one happiness scale, Danes are the happiest people in the world. http://unsdsn.org/files/2013/09/WorldHappinessReport2013_online.pdf http://unsdsn.org/files/2013/09/WorldHappinessReport2013_onl... . The US is #17.

spikels 13y ago
I would argue that PPP is better than exchange rate based comparisons and I think most experts agree.[1] GDP per capita includes everything produced by the country including health care, child care, etc. So that is not the issue here.[2] In the US only about a quarter of GDP is spent by the government while in Denmark about half is spent by the government.[3] So in the US we pay directly for some services like healthcare that in Denmark are paid through the government with taxes. [1] http://mruniversity.com/courses/development-economics/gdp-and-ppp http://mruniversity.com/courses/development-economics/gdp-an... [2] http://en.wikipedia.org/wiki/Gross_domestic_product http://en.wikipedia.org/wiki/Gross_domestic_product [3] http://en.wikipedia.org/wiki/List_of_countries_by_tax_revenue_as_percentage_of_GDP http://en.wikipedia.org/wiki/List_of_countries_by_tax_revenu...
- judk 13y ago
  How does PPP work when healthcare is socialized in Denmark and I don't need to maintain a car, but I do need to lay for heat, etc?
  - spikels 13y ago
    Since you are so interested why don't you do a little research yourself. This has been extensively studied but I think you need to start with the basics. http://en.wikipedia.org/wiki/Purchasing_power_parity http://en.wikipedia.org/wiki/Purchasing_power_parity
- dalke 13y ago
  Sorry, yes, I meant to agree that PPP is better than exchange rates. PPP is difficult because there is no international common basket of goods. Danes get 52 weeks of paid parental leave, of which 18 are to be taken by the mother, 2 weeks by the father, and the others split at the parent think is appropriate, and their job position is waiting for them when they return. What's the equivalent for the US? Some of the leave pay comes from the company. Some from the state. How does the 1 year of overall leave measured in the PPP? How much would it cost to get the same benefits in the US?
  - spikels 13y ago
    No need to apologize. I agree the PPP basket weights is a problem without a perfect solution but I has been studied extensively. My understanding is that most experts don't think it is a huge problem. I think most people would agree that Denmark is more expensive that the US but we can certainly argue about how much more expensive[1]. I'm not expert in the details of either GDP or PPP calculations but here is my understanding of how parental leave would be treated. It would show up in GDP because wages are included under the "income approach", one of the three main approaches used. I don't believe it would directly show up in PPP as it is not a good or service that people buy. I don't think is means anything to say parental leave is less or more expensive. Anyway I don't think it would have a big impact as there only about 50,000 births every year in Denmark in a population of 5.5 million. So if they max out the benefit it is only 25,000/5,500,000 = 0.45%. This is a good example why GDP and PPP work in practice - all these random errors tend to cancel out. If you are interested I suggest you read up on how GDP is calculated. The Wikipedia article if pretty good[2]. [1] http://www.numbeo.com/cost-of-living/compare_countries_result.jsp?country1=United+States&country2=Denmark http://www.numbeo.com/cost-of-living/compare_countries_resul... [2] http://en.wikipedia.org/wiki/Gross_domestic_product http://en.wikipedia.org/wiki/Gross_domestic_product
judk 13y ago
That survey doesn't factor in cultural brainwashing :-) You need to survey folks who have lived in both places.
yummyfajitas 13y ago
GDP includes government spending, so all the things you mentioned are included. You'd have a point if he provided statistics for post-tax wages (excluding benefits) or something like that.

_delirium 13y ago

PPP seems like a weird attempt to decide what the exchange rate "should" be for things to be "equivalent". Why not let the market decide? DKK vis-a-vis USD is a floating exchange rate, where the market can decide how much they think is equivalent. Obviously a house in Copenhagen costs more than one in Nebraska, but that's because it's a better product, just like a good car costs more than a cheap car, and a fine restaurant with ocean view costs more than a taco truck. You can even apply it within countries: the cost of living is higher in Half Moon Bay than Detroit, but that's because living in Half Moon Bay is actually more desirable in real terms, not because dollars in Half Moon Bay are somehow devalued.

spikels 13y ago
PPP was developed for exactly this purpose - to understand differences across areas with different currencies. While it is not perfect it attempts to take things like quality differences into account. Real estate if pretty difficult to compare as it is unique but for many other goods it is much easier. For example you mention cars. The almost identical VW Golf (know as a Rabbit in the US) cost more than twice as much in Denmark as in the US. http://www.numbeo.com/cost-of-living/compare_countries_result.jsp?country1=United+States&country2=Denmark http://www.numbeo.com/cost-of-living/compare_countries_resul...
- _delirium 13y ago
  > The almost identical VW Golf (know as a Rabbit in the US) cost more than twice as much in Denmark as in the US. Yes, but the VW Golf is relevant in the U.S., and irrelevant in Denmark. In the U.S. you have to drive, and in Denmark you don't (and most people don't). The modal share of bicycle commuting in Copenhagen is >50%, because the bike infrastructure is good. I sold my car when I moved from the SF Bay Area to Copenhagen, and now I spend less on transportation, with a better quality of commute (in my subjective estimation). Yet PPP would probably claim transportation costs more! Besides the nice bike infrastructure, I have an unlimited-rides metro pass for $50/mo, which includes very good 24/7 service. How much would it cost me to buy 24/7 transportation in the SF Bay Area, where I don't have to drive the vehicle myself? (Night buses that come once an hour don't count.)