Leprechaun Economics

How Ireland's GDP jumped 26 percent in 2015 because multinationals moved intellectual property onto its books, why Paul Krugman mocked it, and how Ireland created a better measure.

In 2016, Ireland reported that its GDP had grown 26 percent in 2015.

What happened

Multinationals, especially Apple, moved large amounts of intellectual property (like patents) to Irish subsidiaries.
This shifted huge profits and assets onto Ireland’s books.

Krugman’s joke

Economist Paul Krugman called it “leprechaun economics”, mocking the idea of real growth.

The problem

GDP no longer reflected Irish living standards or activity.

Ireland’s solution

The Central Statistics Office created *Modified Gross National Income (GNI)**.
GNI* removes effects of multinational IP, aircraft leasing and redomiciled firms.
GNI* is much smaller than GDP, giving a truer picture.

Lesson

Statistics can be distorted by globalisation; choose measures carefully.

Wider issue

Other small economies with many multinational headquarters face similar measurement problems.

The paper boom

In 2015, Ireland's official GDP soared, but Irish workers saw no sudden jump in wages or jobs.

Thinking GDP growth always means real growth

Ireland's 2015 jump reflected moved intellectual property.

Key takeaways

Ireland's GDP jumped 26 percent in 2015.
Multinationals moved IP onto Irish books.
Krugman called it "leprechaun economics".
Ireland created GNI* for a truer measure.