Question

Briefly discuss why the domestic work undertaken by a stay at home mother or drug dealers are not included as part of GDP? Provide an example of such a situation

Answer 1

Domestic work undertaken by a stay at home mother or a drug dealer is not included in official records of GDP.

This is because of GDP measures the market value of all final goods and services produced in an economy.

In the above given two cases, no new domestic production of services or goods is taking place. This means nothing new is being produced or being contributed to the economy by these agents.

This is why they are not included in GDP calculations.

Example: The household work done by a domestic worker can be termed as a service, but it is very difficult to calculate the value of these services. One might take the average pay of a hired domestic worker in the same area to put a value to the work of unpaid domestic worker, but these rates differ region to region and are highly volatile depending on the type of services.

All these reasons make it too complex to put a value on the services given by a domestic worker. Therefore such activities are not included in the calculation of GDP

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