Gross domestic product (GDP) is the standard measure of the value of the goods and services produced by a country during a period. Per capita GDP is a broad indicator of economic living standards.
Each country calculates GDP in its own currency. In order to compare countries, these estimates have to be converted into a common currency. Often, the conversion is made using exchange rates, but these give a misleading comparison of the volumes of goods and services produced. Comparisons of GDP between countries are best made using purchasing power parities (PPPs) to convert each country's GDP into a common currency. PPPs are currency converters that equalise the purchasing power of the different currencies (see also Rates of conversion).
What does gross domestic product mean? "Gross" signifies that no deduction has been made for the depreciation of machinery, buildings and other capital products used in production. "Domestic" means that it refers to production by the resident institutional units of each country. As many products are used to produce other products, GDP measures production in terms of value added.
GDP can be measured in three different ways: as output less intermediate consumption (i.e. value added) plus taxes on products (such as VAT) less subsidies on products; as income earned from production, obtained by summing employee compensation, the gross operating surplus of enterprises and government, the gross mixed income of unincorporated enterprises and net taxes on production and imports (VAT, payroll tax, import duties, etc, less subsidies); or as final expenditure on the goods and services produced, obtained by summing final consumption expenditures, gross fixed capital formation, changes in inventories and exports less imports.
All OECD countries follow the 1993 System of National Accounts, implying that data are highly comparable across countries. Because of a relatively large number of frontier workers, data on GDP per capita for Luxembourg and, to a lesser extent, Switzerland, are to some extent overstated compared with other countries. GDP data for Australia and New Zealand refer to fiscal years.
For some countries, data for the latest year have been estimated by the OECD. For several countries, historical data have also been estimated by the OECD (by linking the new and old series when countries revise their methodologies but only supply revised data for recent years).
Relatively minor differences in the measured per capita GDP can result in a different country order that may not be statistically or economically significant.
Among OECD countries, the United States has, by far, the largest GDP, followed by Japan and, by some distance, the four largest EU members - Germany, the United Kingdom, France and Italy. The next four OECD countries are Mexico, Spain, Korea and Canada. China's GDP is a little over half of that of the US, while those of India and the Russian Federation are equivalent to 23% and 16%.
Per capita GDP for the OECD as a whole was 33 700 US dollars in 2008. Six OECD countries had per capita GDP in excess of 40 000 US dollars - Luxembourg, Norway, United States, Switzerland, Ireland and the Netherlands. About half of all OECD countries had per capita GDP between 30 000 and 45 000 US dollars, while 10 countries had per capita GDP below 30 000 US dollars, with Turkey, Mexico and Poland at the bottom of the distribution.