What are the failures of GNP as a Measure of Output and Welfare?


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  1. It gives economic performance as a whole but does not indicate which sectors contribute more
  2. Its growth shows an increase in welfare yet some people face a falling / constant/increasing welfare.
  3. GNP has only a few major contributors and these are the only beneficiaries.
  4. The percentage capital calculated from GNP shows that the welfare of all citizens is the same which is a fallacy.
  5. It faces double counting in the value added approach and therefore the data is wrong misleading.
  6. Lack of sufficient competent accumulators leads to exclusion of necessary data hence misleading information
  7. Unwillingness of the self-employed people to give their correct returns in attempt to evade tax leads to the wrong information.
  8. Corrupt auditors are bribed to give wrong balances hence tax evasion.  The level of GNP is also affected in the process.
  9. Some activities are left out due to inaccessibility hostility, animals etc.
  10. Estimation of the subsistence sector which does not go through the moment system is a problem.
  11. Some goods and services do not go through the official market system
  12. Self provision of services e.g. house wives are excluded.
  13. GNP excludes leisure one decides to take by working less.
  14. Illegal activities, though very lucrative, are excluded.
  15. It does not include rents (opportunity cost) for owner occupied houses as well as value of owner raw materials.
  16. It leaves out salaries & wages paid in kind.
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