Decomposition of growth in real disposable income

Abstract

In the course of the past 45 years, Norway has gone from being a moderately prosperous country to one of the wealthiest countries in the world at the end of the first decade of this century. This document refers to two different decompositions that may assist in an understanding of income developments. The first chapter provides the background to the document. The second chapter briefly reviews growth in real disposal income in Norway since 1970. The third chapter shows contributions to growth in real disposable income in Norway decomposed into contributions from production growth, terms of trade effects and changes in the balance of income and current transfers to and from abroad. In the fourth chapter,accumulated growth in real disposable income per capita since 1970 is decomposed into the following components: 1) productivity in oil and gas extraction 2) productivity in non-petroleum industries 3) labour reallocation gains 4) terms of trade effects from petroleum products 5) terms of trade effects from non-petroleum products 6) balance of income and current transfers and 7) hours worked per capita. Both decompositions take as their starting point the definitions in the Norwegian national accounts and both have previously been published by Statistics Norway.