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 can 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).

Measuring GDP growth is important but GDP can grow simply via inflation. Abstracting from price changes to measure real GDP growth provides a sounder basis for assessing growth in economic production.

Disparities in economic performance across OECD countries are often smaller than those prevailing among regions of the same country. Further, these regional disparities have persisted over time, even when economic disparities among countries were falling.

While per capita gross domestic product is the indicator most commonly used to compare living standards across countries, two other measures are preferred by many analysts. These are per capita gross national income (GNI) and net national income (NNI).

Household disposable income is closer to the concept of income generally used in economics and is an important indicator of well-being and living standards. Ignoring changes in net worth that arise from capital transfers or holding gains, household disposable income can be seen as the maximum amount that households can afford to spend on consumption goods or services without having to reduce their financial or non-financial assets or to increase their liabilities.

Household savings are the main domestic source of funds to finance capital investment, which is a major driver of longterm economic growth.

The share of total GDP that is devoted to investment in fixed assets is an important determinant of future economic growth. However, not all types of investment contribute to future GDP growth in the same way, and future GDP growth may also depend on expenditures that are conventionally considered as consumption (e.g. education, health).

Productivity is a measure of the efficiency with which available resources are used in production. Labour productivity, together with use of labour resources, is one of the main determinants of living standards.

Labour productivity growth is a key dimension of economic performance and an essential driver of changes in living standards.

Economic growth can be increased either by raising the labour and capital inputs used in production, or by greater overall efficiency in how these inputs are used together, i.e. higher multi-factor productivity (MFP). Growth accounting involves breaking down GDP growth into the contribution of labour inputs, capital inputs and MFP growth.

Unit labour costs are a key determinant of the competitiveness of the productive system of a country in both domestic and foreign markets. Unit labour costs reflect the combined evolution of compensation of employees per unit of labour input and of labour productivity, and can be an indicator of inflationary pressure on producer prices.

The structure of total value added has changed considerably over recent decades. The share of agriculture is now relatively small in almost all OECD countries. The share of industry has also fallen while services now account for well over 60% of total gross value added in most OECD countries.

GDP growth has not been evenly spread across economic activities. Some economic activities have grown faster than others and some have declined in importance. A convenient way to show how the patterns of economic growth have changed is to distinguish between the various sectors of the economy, such as agriculture, industry and services.

Small firms, and especially recent start-ups, can be very dynamic and innovative. A few very high-performance new and small firms can make an important contribution to employment creation and economic growth. Although the majority of small firms have more modest economic impacts individually, taken together they make an important contribution.

Income inequalities are one of the most visible manifestations of differences in living standards within each country. High income inequalities typically imply a waste of human resources, in the form of a large share of the population out of work or trapped in low-paid and lowskilled jobs.