Why Is the Gdp Per Capita Calculation Inappropriate for Middle-Eastern Countries

Why is the Calculation for the standard of living unrealistic for middle-eastern countries

1. Introduction

Economic welfare and the comparison of the standard of living of different countries in the world is a very important theory explained in macro-economic and it is mainly used to judge how well off a country is compared to another based on a certain number of criterions and indicators. Over the period of time economists have developed different opinions as to what can be considered the best indicator of the changes in the standard of living. The main quantitative tool they agreed upon is called the GDP / Capita.

The GDP or the gross domestic product is the total value of all the goods and services produced within the domestic territory of an economy. This easily reflects how well off a country is based on its production and output. This can be further used to understand the variations in the level of employment of people in the different sectors of an economy. GDP when divided by the total population gives us the GDP / Capita which shows the spread of the total value of GDP that each person in a country gets and this therefore shows the general standard of living for an individual in the economy.

1. Statement of the problem –

This calculation does have its various drawbacks that will be explained further in the research paper. However the argument lies not on the accuracy of its results in general, but on the application of the findings to the middle-eastern or particularly the gulf economies. The Arab world which includes some of the biggest economies in the world such as the Saudi Arabia is considered to be a factor endowment economy (i.e. they are blessed with natural resources). Oil which has played the key role in the development of the gulf region accounts for a major proportion of the GDP of the Middle-eastern economies. According to Wikipedia,

“Saudi oil reserves are the largest in the world, and Saudi Arabia is the world's...