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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 cou

by 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
  - dalke 13y ago
    Good point regarding the number of births, but I don't think the ratio is quite correct. The denominator should likely exclude those too young to work. There's about 1 million under 15 years old (and another 800,000 65 or older, who likely aren't working). How did 50,000 births turn to 25,000 in the numerator? There's 1 year of leave, so that's 50,000, no? I get 50,000/4,500,000 => 1.1% . Still relatively small, yes. I noticed a few things about the [1] you mentioned. It's mostly meant for 20-somethings. That is, it doesn't compare health care costs, daycare costs, etc. which older people and parents would be interested in. Also, there's a deliberate social policy behind why the Volkswagen Golf price is so high Denmark. Quoting from http://www.copenhagenize.com/2012/10/danish-180-tax-on-cars-is-rather.html http://www.copenhagenize.com/2012/10/danish-180-tax-on-cars-... : > this series of taxes was put into place to try and discourage people from driving but also to try and win some money back for society for the destructive nature of automobiles. We know, for example, that for every kilometre ridden by bike, the Danish coffers recieve 23 cents. For every kilometre driven by car, the Danish state pays out 16 cents. I've read through the GDP many times before. I still don't have a good grasp on it. It seems that having a poorly insulated house, for example, is better for the GDP because I need to work more in order to pay the higher heating bills. Or having more road damage because of automotive traffic is better because it means more government funding to rebuild the road system. Or it's better to use MS Windows than OpenBSD because the latter doesn't cost anything and so doesn't appear as part of the GDP. These are listed as 'externalities', but it's these externalities which contribute to happiness, enjoyment of life, etc. So while GDP per capita is used as an approximate measure for the ability to carry these out, it doesn't mean that it's actually being done.

by spikels 13y ago

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
- dalke 13y ago
  Good point regarding the number of births, but I don't think the ratio is quite correct. The denominator should likely exclude those too young to work. There's about 1 million under 15 years old (and another 800,000 65 or older, who likely aren't working). How did 50,000 births turn to 25,000 in the numerator? There's 1 year of leave, so that's 50,000, no? I get 50,000/4,500,000 => 1.1% . Still relatively small, yes. I noticed a few things about the [1] you mentioned. It's mostly meant for 20-somethings. That is, it doesn't compare health care costs, daycare costs, etc. which older people and parents would be interested in. Also, there's a deliberate social policy behind why the Volkswagen Golf price is so high Denmark. Quoting from http://www.copenhagenize.com/2012/10/danish-180-tax-on-cars-is-rather.html http://www.copenhagenize.com/2012/10/danish-180-tax-on-cars-... : > this series of taxes was put into place to try and discourage people from driving but also to try and win some money back for society for the destructive nature of automobiles. We know, for example, that for every kilometre ridden by bike, the Danish coffers recieve 23 cents. For every kilometre driven by car, the Danish state pays out 16 cents. I've read through the GDP many times before. I still don't have a good grasp on it. It seems that having a poorly insulated house, for example, is better for the GDP because I need to work more in order to pay the higher heating bills. Or having more road damage because of automotive traffic is better because it means more government funding to rebuild the road system. Or it's better to use MS Windows than OpenBSD because the latter doesn't cost anything and so doesn't appear as part of the GDP. These are listed as 'externalities', but it's these externalities which contribute to happiness, enjoyment of life, etc. So while GDP per capita is used as an approximate measure for the ability to carry these out, it doesn't mean that it's actually being done.