The gross domestic product (GDP) is an indicator of economic activity which makes it possible to measure and compare economic development levels in different countries. GDP is calculated at current prices as well as at previous year's prices, making it possible to represent economic growth rates without taking into account the influence of prices.
GDP over a given period is calculated using three different approaches:
- the production approach makes it possible to determine the value added created by the different economic actors,
- the expenditure approach shows how the value added created was used (consumption, investments)
- the income approach is interested in the remuneration of the factors of production, i.e. land, labour and capital.
Whereas growth analyses are usually based on GDP growth rates, the notion of GDP per capita allows new factors to be introduced that effect a country's socio-economic development, such as productivity by actual hours worked or labour productivity by jobs in full-time equivalents. GDP per capita is usually used as an indicator of a country's standard of living. However, it is not suitable for analysing the distribution of wealth, quality of life or well-being.
The breakdown of GDP per capita growth rates allows two important explanatory factors to be distinguished: hourly productivity of labour and the effect of labour utilisation.
Furthermore, international comparison of GDP per capita relies on the concept of purchasing power parities (PPP), calculated in the International Comparison Programme of Eurostat/OECD.