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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 measuring social progress in europe

Beyond GDP:Measuringsocialprogress in Europe

Koen Decancq – Erik Schokkaert

Stirling June 2014


Introduction
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.


Introduction1
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
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
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 for cumulative deprivation
Principle 3: Account forcumulativedeprivation


Principle 3 account for cumulative deprivation1
Principle 3: Account forcumulativedeprivation


Principle 3 account for cumulative deprivation2
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 for individual ideas about a good life
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 satisfaction measures do not respect preferences
Life satisfactionmeasures do not respect preferences

  • Thenwhynotuse “happiness”?


Life satisfaction measures do not respect preferences1
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 inequality aversion
Principle 5: inequalityaversion

Justicerequires accounting forinequality in individual well-being.

  • Social welfare = M (1 - I )

Average

Inequality


Principle 5 inequality aversion1
Principle5: inequalityaversion


Outline
Outline

  • Principlesfor a measure of socialprogress.

  • A specificproposal: equivalent income.

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


A specific proposal equivalent income
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 health1
An example: income and health


An example income and health2
An example: income and health


An example income and health3
An example: income and health


An example income and health4
An example: income and health


Pros and cons of equivalent incomes
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”.


Outline1
Outline

  • Principlesfor a measure of socialprogress.

  • A specificproposal: equivalent income.

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


Social progress in europe an illustration
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:


Estimating preferences
Estimatingpreferences

c

c


Estimating preference differences
Estimatingpreferencedifferences

  • Assumption: preferenceheterogeneitybetweensocio-demographicgroups, notbetweencountries.

c


Income equivalent income happiness 2010
Income, equivalent income, happiness (2010)


Income equivalent income happiness 20101
Income, equivalent income, happiness (2010)


Income equivalent income happiness 20102
Income, equivalent income, happiness (2010)


Social welfare 2010
Social welfare (2010)


Yearly growth rates 2008 2010
Yearlygrowthrates (2008-2010)


Conclusion
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.





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