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A better indicator of standards of living: The Gross National Disposable Income

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  • Clara Capelli

    ()
    (Department of Economics and Management, University of Pavia)

  • Gianni Vaggi

    ()
    (Department of Economics and Management, University of Pavia)

Abstract

Measuring the standards of living is a fundamental concern in economics and particularly in the eld of development. Gross Domestic Product (GDP) is the most widely accepted measure for a country's economic size and performance, but in recent years the Gross National Income (GNI) has gained greater importance as a better measure for the monetary resources actually available to those who live in a country. However, this paper shows that - especially in developing countries - GNI is not the best indicator for people's living standards, as it does not record the so-called unilateral transfers (foreign aid and workers' remittances among others) and, therefore, the secondary distribution of income that takes place worldwide. In the last decades unilateral transfers - and most importantly workers' remittances - have been among the largest types of income ows entering developing countries thanks to the remarkable increase in the mobility of people. This has had a signi cant impact on these populations' purchasing power that cannot be neglected. Hence, the Gross National Disposable Income (GNDI), which includes both net factor income (captured by the GNI) and unilateral transfers, is to be considered a better tool to assess the resources at a population's disposal for consumption and saving. Yet, GNDI is rarely available in the major international reports and datasets and often confused in GNI in common practice. This paper tries to contribute to closing this void and includes a table in which GNDI is calculated for all countries listed in the World Bank dataset.

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File URL: http://economia.unipv.it/docs/dipeco/quad/ps/RePEc/pav/demwpp/DEMWP0062.pdf
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Bibliographic Info

Paper provided by University of Pavia, Department of Economics and Management in its series DEM Working Papers Series with number 062.

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Length: 28 pages
Date of creation: Dec 2013
Date of revision:
Handle: RePEc:pav:demwpp:demwp0062

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Keywords: National Income; Balance of Payments; Remittances;

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  1. Ibrahim Sirkeci & Jeffrey H. Cohen & Dilip Ratha, 2012. "Migration and Remittances during the Global Financial Crisis and Beyond," World Bank Publications, The World Bank, number 13092, August.
  2. Milorad Kovacevic, 2010. "Review of HDI Critiques and Potential Improvements," Human Development Research Papers (2009 to present), Human Development Report Office (HDRO), United Nations Development Programme (UNDP) HDRP-2010-33, Human Development Report Office (HDRO), United Nations Development Programme (UNDP).
  3. Smith, Adam, 1776. "An Inquiry into the Nature and Causes of the Wealth of Nations," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, McMaster University Archive for the History of Economic Thought, number smith1776.
  4. Nigel Driffield & Chris Jones, 2013. "Impact of FDI, ODA and Migrant Remittances on Economic Growth in Developing Countries: A Systems Approach," The European Journal of Development Research, Palgrave Macmillan, Palgrave Macmillan, vol. 25(2), pages 173-196, April.
  5. Annalisa Prizzon & Gianni Vaggi, 2009. "On The Sustainability of External Debt: Is Debt Relief Enough?," Quaderni di Dipartimento, University of Pavia, Department of Economics and Quantitative Methods 094, University of Pavia, Department of Economics and Quantitative Methods.
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