GDP Components' Contributions to U.S. Economic Growth

By Boustead, Thomas | Monthly Labor Review, June 1998 | Go to article overview
Save to active project

GDP Components' Contributions to U.S. Economic Growth

Boustead, Thomas, Monthly Labor Review

Rebasing GDP and its components on chained 2001 dollars enhances the role of services as a contributor to economic growth, while diminishing the significance of private investment; only minor effects are seen on the contributions of net foreign trade and government expenditures

Recently, the Bureau of Labor Statistics projected that U.S. real gross domestic product (GDP) will exceed $8.5 trillion by 2006, an increase of more than $1.6 trillion during the 1996-2006 period.(1) In the BLS economic projection, real GDP and its components were stated in chained 1992 dollars, as is typically done for real output measures.(2) However, the BLS projection employs a terminal year 14 years from the 1992 base year used for the chained dollars, and because relative prices in the economy can change substantially over 14 years, the question arises as to whether some other base year would be more appropriate. This article explores the issue by rebasing from chained 1992 dollars to chained 2001 dollars. While this rebasing does not change calculated growth rates, it does affect calculations of how the various GDP components contribute to overall GDP growth.

Economic growth can be analyzed from several vantage points, such as the growth rates of the various GDP components or their contributions to growth. Each measure has advantages, and certain weaknesses as well. Growth rates, for example, highlight the dynamic sectors of the economy. But often the fastest growing components of GDP are the smaller ones. These components will contribute proportionately less to the overall increase in GDP because their growth rates apply to small initial values.

Conversely, the contributions to growth of the GDP components--defined for each component as the ratio of the change in that component over the projection period to the total change in GDP over the period, expressed as a percentage--pinpoint those components most responsible for additions to GDP. However, with this approach, some imprecision results: upon aggregation of the component percentages, a residual amount remains.

Analysis in chained 1992 dollars

Table 1 compares the 1996-2006 projected growth rate, the expected percent distributions of GDP, and the projected contributions of various components of GDP to its growth. According to the table, those components of GDP with the fastest projected growth rates involve foreign trade. Exports of goods are expected to advance 8.0 percent annually over the projection period, while overall exports are anticipated to grow 7.4 percent annually. Countering the growth of exports, the Bureau projects imports of goods to expand at a 6.9-percent annual rate from 1996 to 2006. Total imports would register a 6.4-percent annual advance for the period.

Table 1. Major components of real GDP, 1996 and projected to
2006, in chained 1992 dollars

                              Billions of chained dollars
                               1986       1996        2006

GDP                         5,489.9      6,911.0     8,539.1
 Personal consumption       3,708.7      4,690.6     5,772.9
 Durables                     448.4        611.5       867.3
 Nondurables                    4.0      1,441.9     1,683.8
 Services                   2,041.4      2,638.2     3,239.8

Private investment            813.7      1,060.2     1,469.7
 Nonresidential               548.5        766.2     1,132.0
  Structures                  203.3        189.6       210.8
   durables                   345.9        578.3       935.6
  Residential                 257.0        276.8       302.7

Exports                       362.2        826.1     1,686.0
 Goods                        243.6        609.3     1,313.2
 Services                     120.3        218.0       389.7

Imports                       526.1        940.3     1,749.8
 Goods                        425.5        796.8     1,550. 

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Cite this article

Cited article

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

GDP Components' Contributions to U.S. Economic Growth


Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?