GDP in Developing Countries. Watch

Magic Dust
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So I have been doing some revision on development economics, and a thought struck me...

Is it possible to argue that GDP is not a great representative of the country as a whole. This is because if you look at examples in Europe where EU residents have the ability to freely move between countries many people earn money in one country and then send it to their families in another. Another effect of this is in developing countries, where big multi-national companies are exploiting them, so the figures of GDP would actually be highly inflated as it is very unlikely the company would put these earnings back into the countries Economy....

Is the fact that I wasn't taught this argument in lessons because GDP is unable to take account of all work, such as barter systems, or where farmers grow food and live of that instead of selling it? Or is it because the measure of GDP measures what is produced, and as in the case of developing countries you could claim that money is going back into the economy through wages, although some companies take their own workers...

I am just unsure whether my argument is coherent, or even an argument! It'd be great if someone could agree/disagree with me. Am I thinking into this too much? Haha.
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Stalin
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I have no idea what you're asking but GDP means nothing, especially in China and India's cases, when the vast majority of their citizens are in complete poverty.
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Magic Dust
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(Original post by Stalin)
I have no idea what you're asking but GDP means nothing, especially in China and India's cases, when the vast majority of their citizens are in complete poverty.
Oh yeah, I know it doesn't show the distribution of wealth, but what I mean is, are GDP levels in many countries inflated, thus making them more unreliable. GDP = National Income = National Output = National Expenditure. However, if you look at migrant workers, of which in the EU there are many then National Income does not = National Expenditure, as these people are sending their money home to their families in a different country.

In the case of LDC's big multi-national countries exploit their natural resources, by setting up a firm and paying very low wages, and these countries do not see the profits, so National Output doesn't = National Expenditure as the money doesn't make it back into the country....

I am getting so confused... :confused:
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Robofish
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(Original post by Magic Dust)
Oh yeah, I know it doesn't show the distribution of wealth, but what I mean is, are GDP levels in many countries inflated, thus making them more unreliable. GDP = National Income = National Output = National Expenditure. However, if you look at migrant workers, of which in the EU there are many then National Income does not = National Expenditure, as these people are sending their money home to their families in a different country.

In the case of LDC's big multi-national countries exploit their natural resources, by setting up a firm and paying very low wages, and these countries do not see the profits, so National Output doesn't = National Expenditure as the money doesn't make it back into the country....

I am getting so confused... :confused:
I think when you are talking about national income in this sense, it doesn't account for profits being sent abroad as that cash flow is still earnt within that country, thus it's still part of the national income, when it's sent abroad by TNC's or families, it affects the balance of payments of the country as it would worsen the capital account of the country becaues funds are being sent abroad.. hope this helps
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