A bottom-up analysis of GNI* and productivity
What is this paper about?
This paper looks to develop a clearer picture of what makes up modified gross national income (GNI*) — a measure that is now widely accepted as a relevant measure of the size of Ireland’s economy.
We work from the bottom up, exploring how to build up the overall measure based on easier to understand components using the expenditure, income, and output approaches. We also explore what this tells us about productivity in the Irish economy. We find that evidence that Ireland’s productivity growth is better aligned with European countries than other measures suggest.
What do we recommend as a result?
We propose that estimates of GNI* be developed further using a bottom-up approach such as is explored in the paper. In particular, we find that the income approach offers a useful way to build up estimates of GNI* from its sub-components in a way that could be readily understood — one based primarily on wages, profits, and taxes. This approach would also help to fulfil the recommendations made in 2016 by the Economic Statistics Review Group that quarterly estimates of GNI* be developed.
The opinions expressed and arguments employed in this paper do not necessarily reflect the official views of the Fiscal Council.