We took a look at which components of the global gross domestic product (sum of country GDP) have grown the fastest over the past 40 years.
The analysis uses the three approaches for defining GDP:
– Expenditure approach. How GDP is spent–the most commonly known GDP definition: Y = C + I + G + (X – M)
– Income approach. We look at household income divided into upper, middle, and lower class households
– Production approach. That is, which economic sectors contribute to GDP
The graph below shows the annual growth rate for 15 components of global GDP.
- Logistics and communications is the sector that grows the fastest. This is mainly because of the mobile telephone revolution.
- Upper income is growing quickly. But this does not mean that global inequality is increasing. In fact, it is rapidly declining. See this post.
- Household spending is growing faster than government spending. This is almost a universal trend (more on this in a later post).