Variations in living standards in the global economy

Despite the increasing integration of the global economy, large differences in living standards between countries have persisted and even worsened in recent years. This is evidently indicated by the stark differences in the levels of economic development and growth across the global economy, suggesting the wide gaps between wealthy and poor nations. Almost 80% of GWP income is dominated by just 15% of the world's population whilst the rest of the 20% is shared by 85%. While international organisations are attempting to reduce these significant differences, inequality remains an entrenched feature of the global economy. The main reasons accounting for these differences result from domestic and global factors.

Standards of living are usually measured by a nation's Gross Domestic Product (GDP) per capita. GDP measures the total value of all goods and services produced in an economy in a given year, and it is usually quoted in per capita terms to adjust for differences in levels in population levels and population growth over time. As GDP per capita are often adjusted to purchasing power parity (PPP) to allow comparison between different economies. However, economic growth may be an inaccurate measure as it only indicates an expansion of a country's productive capacity, resulting in the increased ability of a nation to satisfy the material wants of its people over a period of time. GDP figures fail to account for other social and economic factors such as the size of the black market, domestic work that is not given a financial value and the degree of income inequality within a society. Therefore economic development is a much broader concept that attempts to measure the overall social and economic welfare of the overall population through quality of life indicators. One of the most common indicators is the Human Development Index (HDI) that gives...