Beyond GDP: Using Equivalent Incomes to Measure Well-Being in Europe
- 802 Downloads
It has become widely accepted that focusing exclusively on income growth may lead to a too narrow-sighted measure of changes in well-being. People care about other dimensions of life, such as their health, employment, social interactions and personal safety. Moreover, an exclusive focus on income growth remains blind to the distribution of income and well-being in the society. We propose therefore a set of five principles for a richer measure of well-being. In particular, we advocate the use of a measure based on “equivalent incomes”, which satisfies these principles. We discuss and illustrate how this equivalent income approach can be implemented in Europe, using the ESS data for 2008 and 2010. We find that introducing inequality aversion and including other dimensions in the analysis leads to a remarkably different perspective on the growth of well-being in Europe.
KeywordsEquivalent incomes Preferences Growth in well-being Europe
We gratefully acknowledge financial support from Belspo for the MEQIN project. We thank an anonymous referee, Romina Boarini, Marleen De Smedt, Marc Fleurbaey, Frank Vandenbroucke and seminar participants in Brussels, Cali, Frankfurt, Ispra, Leuven, London, Paris, Rome, and Stirling for useful comments.
- Box, G. E. P., & Cox, D. R. (1964). An analysis of transformations. Journal of the Royal Statistical Society: Series B (Methodological), 26(2), 11–252.Google Scholar
- Cobb, C. W., & Rixford, C. (1998). Lessons learned from the history of social indicators. San Francisco: Redefining Progress.Google Scholar
- Decancq, K., Fleurbaey, M., & Schokkaert, E. (2015). Inequality, income, and well-being. In A. B. Atkinson & F. Bourguignon (Eds.), Handbook on income distribution (Vol. 2, pp. 67–140). Amsterdam: Elsevier.Google Scholar
- Decancq, K., Fleurbaey, M., & Schokkaert, E. (forthcoming). Happiness, equivalent incomes, and respect for individual preferences. Economica.Google Scholar
- Eurobarometer. (2011). Well-being: aggregate report. Eurobarometer Qualitative Studies.Google Scholar
- Eurofound. (2012). Third European Quality of Life Survey—Quality of Life in Europe: Impacts of the crisis. Luxembourg: Publications Office of the European Union.Google Scholar
- European Commission. (2009). GDP and beyond. Measuring progress in a changing world. Communication from the Commission to the Council and the European Parliament: COM(2009) 433.Google Scholar
- European Statistical System. (2011). Sponsorshop group on measuring progress, well-being and sustainable development: Final report adopted by the European Statistical System Committee in November 2011. Available on http://ec.europa.eu/eurostat/documents/42577/43503/SpG-Final-report-Progress-wellbeing-and-sustainable-deve.
- Helliwell, J., Layard, R., & Sachs, J. (2013). World happiness report 2013. United Nation Sustainable Development Solutions Network.Google Scholar
- Howard, M. (2002). The weakness of civil society in post-communist Europe. Cambridge: Cambridge University Press.Google Scholar
- Layard, R. (2005). Happiness: lessons from a new science. London: Allan Lane.Google Scholar
- McMahon, D. (2005). Happiness: a history. New York: Atlantic Monthly Press.Google Scholar
- OECD. (2011). How’s life? Measuring well-being. Paris, OECD Publishing: doi: 10.1787/9789264121164-en.
- OECD. (2014). All on board. Making inclusive growth happen. Paris: OECD.Google Scholar
- Sen, A. (1985). Commodities and capabilities. Amsterdam: North-Holland.Google Scholar
- Stiglitz, J., Sen, A., & Fitoussi, J.-P. (2009). Report by the commission on the measurement of economic performance and social progress. Paris. http://www.stiglitz-sen-fitoussi.fr/documents/rapport_anglais.pdf.