Beyond gdp measuring social progress in europe
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Beyond GDP: Measuring social progress in Europe. Koen Decancq – Erik Schokkaert Stirling June 2014. Introduction. “Beyond GDP” Quest for a measure of social progress Discussion on three levels: Principles for a measure of social progress

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Beyond GDP:Measuringsocialprogress in Europe

Koen Decancq – Erik Schokkaert

Stirling June 2014


Introduction

  • “Beyond GDP”

  • Questfor a measure of socialprogress

  • Discussion on three levels:

    • Principlesfor a measure of socialprogress

    • A specificproposal: equivalent income.

    • Illustration: well-being and socialprogress in Europe between 2008 and 2010.


Introduction

  • “Beyond GDP”

  • Questfor a measure of socialprogress

  • Discussion on three levels:

    • Principlesfor a measure of socialprogress

    • A specificproposal: equivalent income.

    • Illustration: well-being and socialprogress in Europe between 2008 and 2010.


Principle 1: Focus on individual well-being

The ultimate criterion to evaluatesocialprogress is the well-being of individuals making up the society.


Principle 2: Focus on outcomes

The well-being of individualsdepends on the outcomes in the different dimensions of life.

  • Well-being is notfullydeterminedbyincome.

  • Otherdimensions of life are essential (e.g., health, quality of socialinteractions and of the natural environment, safety, … ).


Principle 3: Account forcumulativedeprivation


Principle 3: Account forcumulativedeprivation


Principle 3: Account forcumulativedeprivation

Accounting forcumulativedeprivationrequiresto construct first anindex of well-being at the individual level and thenaggregatethese well-being indices acrossindividuals.

  • Comparewithdashboards of development

  • … and the Human Development Index (HDI)


Principle 4: Respect forindividualideasabout a goodlife

The measure of individual well-beingshould respect the individualideasaboutwhat is a good life.

  • Thisdiscards the use of objective indicators, such as the Human Development Index (HDI)

  • And also the MultidimensionalPoverty Index, …


Life satisfactionmeasures do not respect preferences

  • Thenwhynotuse “happiness”?


Life satisfaction measures do not respect preferences

  • IfAnn and Bob have the samepreferences, respect forpreferences means thatAnn shouldbeseen as better off thanBob.

  • Now look at whatcould happen, when we askto Ann and Bob howsatisfiedtheywouldbe in bothsituations

  • Bob is happierthan Ann

  • Thenwhynotuse “happiness”?

5 for Ann

9 for Bob

3 for Ann

7 for Bob


Principle 5: inequalityaversion

Justicerequires accounting forinequality in individual well-being.

  • Social welfare = M (1 - I )

Average

Inequality


Principle5: inequalityaversion


Outline

  • Principlesfor a measure of socialprogress.

  • A specificproposal: equivalent income.

  • Illustration: well-being and socialprogress in Europebetween 2008 and 2010.


A specificproposal: Equivalent income

  • Fix referencevaluesfor all the non-incomedimensions.

  • Equivalent income = the hypotheticalincomethat, ifcombinedwith the referencevalueon all non-incomedimensions, would place the individual in a situationthatshefindsequallygood as her actualsituation.


An example: income and health


An example: income and health


An example: income and health


An example: income and health


An example: income and health


Pros and cons of equivalent incomes

  • Pros:

    • Satisfies all our basic principles.

    • Measurable in money terms, canbeintroduced in anysocial welfare, inequality or povertymeasure.

  • Cons:

    • Lessintuitivethanhappiness or HDI – but these approaches do notsatisfyour basic principles.

    • Choice of referencevalues: anethical question, hence room fordebate.

    • More information is neededabout “preferences”.


Outline

  • Principlesfor a measure of socialprogress.

  • A specificproposal: equivalent income.

  • Illustration: well-being and socialprogress in Europebetween 2008 and 2010.


SocialProgress in Europe: An illustration

  • European Social Survey, 2008 and 2010.

  • 18 countries: 15 EU-members, Switzerland, Norway, the Russian Federation. About 52,000 individualobservations.

  • Dimensions:


Estimatingpreferences

c

c


Estimatingpreferencedifferences

  • Assumption: preferenceheterogeneitybetweensocio-demographicgroups, notbetweencountries.

c


Income, equivalent income, happiness (2010)


Income, equivalent income, happiness (2010)


Income, equivalent income, happiness (2010)


Social welfare (2010)


Yearlygrowthrates (2008-2010)


Conclusion

  • We stronglybelieve in the basic principles. Debateshouldbeabouttheirethical foundation.

  • The equivalent income is aninteresting concept, but theremaybeother approaches.

  • Ourempiricalillustration is onlymeant to beanillustration, but interesting (first) findings.


From income to equivalent income (2010)


Direct effects for some typical countries


Results


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