A Comparative Analysis of Economic Growth and Living Standards in Russia and Germany

This report analyzes the economic growth and living standards in Russia and Germany, examining factors such as GDP, income inequality, HDI, poverty line, and unemployment. It compares the two countries in terms of their economic growth and living standards, and explores the extent to which economic growth contributes to living standards. The report concludes that while Germany has a higher GDP and lower unemployment, both countries have similar living standards.

Economics Assignment
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Contents
Introduction......................................................................................................................................2
Economic growth of countries.........................................................................................................3
GDP of the countries...................................................................................................................3
GFC impact..................................................................................................................................4
The sector that drives growth......................................................................................................5
Examining the standards of living in terms of social and economic welfare..................................6
GDP per capita.............................................................................................................................6
Income inequality........................................................................................................................6
Human Development Index.........................................................................................................8
Unemployment figures..............................................................................................................10
Population living below the poverty line...................................................................................12
Comparing the economic growth and standard of living...............................................................12
The country better in terms of economic growth.......................................................................12
The country better in terms of living standards.........................................................................13
The extent to which economic growth contribute to the living standard......................................13
Conclusion and recommendations.................................................................................................15
References......................................................................................................................................16

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Introduction
The aim of the report is to explore the concepts of economics with the help of two countries that
include Russia and Germany. The report includes examining economic growth and countries are
able to achieve it. In addition, the economic and social welfare of two companies has been
examined which helps in managing the standard of living. This economic, as well as the social
welfare, is examined with the help of GDP, income inequality, HDI, poverty line and many other
factors that help in evaluating the living standard. The comparison of the economic growth and
standard of living between the two countries that are Russia and Germany are discussed.
Moreover, the concepts of economics help in understanding to what extent economic growth has
effectively contributed to the living standard of the companies.

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Economic growth of countries
GDP of the countries
Russia is the world main state with the borders European and Asian countries with the Pacific
and Arctic oceans. The country is growing that has been witnessed, as country is world’s sixth
largest global economy in the year 2017 according to World Bank ranking that majorly adjusts
the GDP for the price difference among the countries (Moscow Times, 2018).
(Source: Statista, 2018)
The above-given image reflects the statistics related to gross domestic product (GDP) in Russia
from year 2012 to 2017 with projection until the year 2022. GDP refers to total market worth of
all products as well as the services that are formed across the country on the annual basis. The
GDP reflects the important indicator of economic strength. In the year 2017, the GDP of Russia

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was about 1.58 trillion US dollars. From year 2013, the GDP of the country will decline and in
the near future, the GDP will increase.
Germany is considered as a western European nation with landscape of the forests, mountains,
rivers, and North Sea beaches. The GDP of company is increasing after a fall in the year 2014.
The GDP in Germany was worth of 3677.44 billion US dollars in the year 2017 that shows that it
represents approx. 5.93% of the world economy.
(Source: Trading Economics, 2018)
The image given above shows that in the year 2010, the GDP of the economy was less with
3417.09 but it increased in the year 2011. However, the fluctuation in the GDP was there as it
decreased in 2012 and continued to increase by the year 2014.
GFC impact
In the analysis, this has been found that GFC has created an impact on the economies of the
country.
 Russia’s economy was also affected and it appeared from recession in 3rd quarter of 2009
just after 2nd quarter of top score that shows the adverse development. GDP contracted by

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7.9% for year 2009 to some extent less than the economics ministry forecast of approx.
8.5.
 GFC hit on Germany was hard which lead to the greatest plain economic failure that
appears in the past of Federal economic. GFC has affected the manufacturing sector that
is considered as one of the major contributing sectors of the country in GDP (Niemeier,
Mattern and Koch, 2010). GFC lead to the changes in the GDP growth rate that directly
affected the economy.
The sector that drives growth
Russia: - In Russia, GDP is made up the three broad sectors that include agriculture sector that
majorly contributes 4% of GDP, which is further followed, by its industrial as well as the service
sectors that contribute approx. 32% and 63% respectively as per the data revealed by Work bank
in the year 2016 (Bajpai, 2017).
Sectors that drive growth
Agriculture
Industrial sector
Service sectors
Germany: - Similarly, this has been found that Germany GDP receives the contribution from
agriculture with 0.63% of the GDP. Moreover, the remaining contribution is done by the industry
and service sectors with a number of 27.6% and 61.9% (Statista, 2018).

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Sectors that drive growth
Agriculture
Industry sectors
Service sectors
Examining the standards of living in terms of social and economic
welfare
GDP per capita
The GDP per capita shows the living standard of people in relation of social and economic
welfare. Germany recorded GDP per capita at 46747.19 US dollars in the year 2017, which is
almost equal to 370% of the world’s average (Trading Economics, 2018). On the other hand,
Russia recorded GDP per capita was recorded as 11441 US dollars in 2017. This shows that it is
equal to approx. 91% of the world’s average. These elements show that Germany has a high
living standard comparing it with Russia. The GDP of the country adjust according to the
purchasing power and parity is heavily refined to estimate the true income that is an essential
element of the well-being.
Income inequality
Income inequality is one of the reasons that affect the living standard of the people in terms of
the economy as well as social growth.

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Russia: - In Russia, this has been found that 10% revenue share rose from less than 25% in the
year 1990-91 to more than 45% by the year 2015. Further, this has been found that the highest
1% revenue share from the less than 5% at the beginning of the evolution which is about 20-
25%. This has been found that considered the entire period of 1989-2016 as an entire, average
per adult national revenue has reflected an increase by 41% as per the benchmark
approximations that is approx. 1.3% per year. This clearly shows that in Russia, the different
income groups have taken the benefit of growth experiences. This has been found that the bottom
50% earners avail the benefit from very minimum or negative growth. This shows that Russian
capitalism seats very few constraints on the top incomes and with this; it reflects the high
tolerance for the extreme inequality
Germany: - The number of Germany at the risk of slipping into deficiency is the uppermost
since the country’s East as well as West was reunified in the year 1990. This has been found that
people of the country are dealing with the issue because benefits are not shared equally. The
richest 10% of the families saw their actual income jump by approx. 27% that is between 1991
and 2014 as per the research conducted by the German Institute of Economic. This has been
found that the income of middle-class people has increased only by 9% over the same period
while on the other hand households at the bottom saw that there is drop in their income by 8%
(Kottasova, 2017). In addition to this, the wages that are paid to the workers has increased by 5%
between the year 2000 and 2016. At the same duration, the income from the investment and
several other business activities jumped by 30%. The gap of income has been interpreted into the
main changes that happen in wealth. According to the reviews of Germany’s central bank, richest
10% of the population possesses 60% of the properties while on the other hand the bottoms 40%
are not able to maintain anything. The rise in income inequality shows that the share of Germany

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is at the risk of dwindling into the poverty that has skipped from 11% two-decade age to 16% in
the year 2014.
(Source: Kottasova, 2017)
Human Development Index
The human development index (HDI) is a statistic compound guide of life expectancy,
education, and per capita revenue reflectors that is majorly used with the motive to rank the
nations into the four levels of human development.
Russia: - Russia human development index for the Russian Federation was approx. 0.82 score in
the year 2017. The human development index of the Russian Federation has reflected an increase
from 0.7 scores in 1998 to 0.82 score in the year 2017 that is growing at the average annual rate
of 0.79% (Global economy, 2018).

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(Source: Global economy, 2018)
This means that the development in terms of the level of education and life expectancy is slow in
the country because the human development index is less than 0.800 but this is also found that
the country is able to grow in term of development as the index is gradually increasing.
Germany: - The human development index (HDI) for Germany is explained with the graph
given below which shows the data from 1990 to 2017. HDI of the country is statistics that
contribute to combining the life expectancy, level of education and GDP per capita. This has
been found that countries with the scores of more than 0.800 are measured to have a high level of
development comparing it with the nations that are present with the score lower.

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(Source: Global economy, 2018)
The image shows that the country has improved from 0.801 from the year 1990 to 0.936 by 2017
suggesting that Germany has steadily had a high level of human development.
Thus, this shows that the development in terms of living standard is high in Germany as
compared to Russia in the past few years. However, growth has been registered by both
countries.
Unemployment figures
Unemployment in the countries also affects the development of the living standard of the
country. Russia registered unemployment at the edged up to 4.9% in January 2019 from 4.8
previous months. It has been found that it has the highest jobless rate since last April. Thus, this
is the reason that the unemployment rate in Russia averaged 7.52% from 1992 until 2019
(Trading Economics, 2018).

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(Source: Trading Economics, 2018)
Presently, the unemployment number has been increased which will create a direct impact on the
development of the country. High unemployment leads to high funds with the people and
government that will be utilized by the company for improving the living standard of people.
On the other hand, Germany is able to major decrease in the unemployment figures as it was
3.2% in January 2019, which is lower from 3.3% (Trading Economics, 2018). This offers a high
probability of improvement in the living standard of people, as more people will make the
investment in their social and economic conditions for the improvement.
(Source: Trading Economics, 2018)

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Population living below the poverty line
Germany has experienced success in the economy from the past 2 years but this has been found
unexpectedly there is a large portion of people who are living below the poverty line. In the year
2015, the poverty of Germany reaches on the unseen level of 15.7% of the population that is
living in poverty. The rise in poverty is one of the major factors that influence the living standard
of people in terms of social as well as economic welfare. The rise in poverty shows that the
people in the country are not able to attain even the basic entities.
Similar to this, the research institute study reflects that more than one-fifth of the Russian people
live in deficiency. This has been found that the research of the World Bank and the Russian
Federal State Statistics provision reflects that poverty rate recorded for the year 2017 was 13.2%
(RFE/RL, 2018). This means that one-fifth of the people are not able to attain the basic things
that meet their needs. Thus, one-fifth Russian people are not able to maintain the living standard
in social as well as economic welfare.
Comparing the economic growth and standard of living
The country better in terms of economic growth
Considering the above analysis of Russia and Germany, this has been found that Germany is
considered better in terms of economic growth. The reason behind selecting Germany is the GDP
of the country that is growing with a good positive number. The rise in the GDP of Germany will
contribute effectively in increasing the economy of the country due to which it is considered as a
country with superpowers. Moreover, the sectors of the company are expanding their operations
and working effectively due to which the economic growth in the company is possible.

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The country better in terms of living standards
Considering the analysis, this has been found that both Russia and Germany are at the same level
in terms of living standard. However, this has been found that Germany has improved the living
standard of the population in terms of social and economic welfare. Germany is performing
better as they are able to maintain low unemployment within the country that contributes to
improving the living standard of people. Moreover, the HDI of the country is better than Russia
that helps the country to bring development in the country and improve the living standard of the
people. Germany is able to maintain 0.936 HDI within the country due to which the development
takes place on a rapid basis (Country Economy, 2018). Further, effective economic growth leads
to the improvement in living standard due to which Germany is better performing than Russia.
The extent to which economic growth contribute to the living standard
Economic growth is referred as the surge in the productive potential of an economy as the
growth can lead to an increase in the living standard because if GDP rises then there is more
money in the domestic economy. This shows that business can generate more profit and this
makes them pay high wages to employees and allow them to hire more employees.
Russia and Germany have high economic growth and due to which they are able to contribute
effectively in world growth. The economic growth of a country is inclusive which simply means
that growth or progress of the country. In this type of growth, the countries are able to provide
equal benefits to every citizen. However, there are some situation and areas where the country is
not able to provide as much as a benefit.
The countries that have been selected are able to maintain the high living standard, which is clear
from their GDP, and disposable income that shows their improvement in a living standard.

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Moreover, the economic growth of the country helps in achieving a high living standard. The rise
in economic growth will increase the disposable income of people on different services and
products that lead to a rise in living standard (Hall, 2018). In addition to this, Germany is trying
to reduce unemployment, which contributes in improving the living standard.

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Conclusion and recommendations
In the end, this can be concluded that the economic growth of the company is totally depended
on some of the economic factors. Countries on which analysis of economic growth and living
standard has been done include Russia and Germany. The report evaluated the factors that
contribute in the economic growth of the company. GDO of the countries can influence the
living standard. The living standard of the countries has been evaluated with the help of income
inequality, HDI, unemployment figures, poverty line, and the GDP per capita. All these factors
help in a deciding a country that is better performing in term of economic growth as well living
standard. In the end, it is suggested to Russian and Germany government to take the proper
measures to reduce poverty and unemployment. This will effectively contribute in improving the
living standard of people.

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References
Bajpai, P. (2017) Emerging Markets: The Parts of Russia's GDP [Online]. Available from:
https://www.investopedia.com/articles/investing/120615/emerging-markets-analyzing-russias-
gdp.asp [Accessed on 9th March 2019]
Country Economy (2018) Germany - Human Development Index – HDI [Online]. Available
from: https://countryeconomy.com/hdi/germany [Accessed on 9th March 2019]
Global economy (2018) Russia: Human development [Online]. Available from:
https://www.theglobaleconomy.com/Russia/human_development/ [Accessed on 9th March 2019]
Hall, M. (2018) How Does GDP Affect the Standard of Living? [Online]. Available from:
https://www.investopedia.com/ask/answers/060115/how-does-gross-domestic-product-gdp-
affect-standard-living.asp [Accessed on 9th March 2019]
Kottasova, I. (2017) Rich Germany has an inequality problem. These numbers prove it [Online].
Available from: https://money.cnn.com/2017/09/20/news/economy/germany-election-inequality-
income/index.html [Accessed on 9th March 2019]
Moscow Times (2018) Russia 6th Largest Economy in World GDP Rankings [Online]. Available
from: https://www.themoscowtimes.com/2018/07/13/russia-6th-largest-economy-in-world-GDP-
rankings-a62236 [Accessed on 9th March 2019]

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Niemeier, S., Mattern, F. and Koch, P. (2010) After the crisis: Refining Germany’s economic
model [Online]. Available from: https://www.mckinsey.com/featured-insights/europe/after-the-
crisis-refining-germanys-economic-model [Accessed on 9th March 2019]
RFE/RL (2018) One-Fifth Of Russians Live In Poverty, 36 Percent In 'Risk Zone,' Study Finds
[Online]. Available from: https://www.rferl.org/a/study-22-percent-of-russians-live-in-poverty-
36-percent-in-risk-zone-/29613059.html [Accessed on 9th March 2019]
Statista (2018) Germany: distribution of gross domestic product (GDP) across economic sectors
from 2007 to 2017 [Online]. Available from:
https://www.statista.com/statistics/375569/germany-gdp-distribution-across-economic-sectors/
[Accessed on 9th March 2019]
Statista (2018) Human development index score of Germany in selected years from 1990 to 2017
[Online]. Available from: https://www.statista.com/statistics/876967/human-development-index-
of-germany/ [Accessed on 9th March 2019]
Statista (2018) Russia: Gross domestic product (GDP) in current prices from 2012 to 2022 (in
billion U.S. dollars) [Accessed on 9th March 2019]
https://www.statista.com/statistics/263772/gross-domestic-product-gdp-in-russia/ [Accessed on
9th March 2019]
Trading Economics (2018) Germany GDP [Online]. Available from:
https://tradingeconomics.com/germany/gdp [Accessed on 9th March 2019]
Trading Economics (2018) Germany GDP per capita [Online]. Available from:
https://tradingeconomics.com/germany/gdp-per-capita [Accessed on 9th March 2019]

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Trading Economics (2018) Germany Unemployment Rate [Online]. Available from:
https://tradingeconomics.com/germany/unemployment-rate [Accessed on 9th March 2019]
Trading Economics (2018) Russia Unemployment Rate [Online]. Available from:
https://tradingeconomics.com/russia/unemployment-rate [Accessed on 9th March 2019]