Index of Economic Well-Being

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Index of Economic Well-Being

The Index of Economic Well-Being (IEWB) has been created by the Canadian researcher Lars Osberg (Dalhousie University) in 1985. Observing the inaccuracy of Gross Domestic Product (GDP) to assess economic well-being, the IEWB suggests a global approach of the different dimensions of the economy, influencing the well-being of a society’s members. Originally, its elaboration was anchored in theoretical debates within economic and social sciences. Though, the IEWB aims first and foremost to constitute a tool for facilitating the elaboration of individual and collective judgments on national well-being. The IEWB is thus not only an academic measuring tool. It is above all a synthetic way of presenting a large range of economic information, allowing citizens, policy-makers and experts to assess economic well-being and its components.

Methodology and applicability

The IEWB gathers four conceptuelly distincts dimensions :

  • Effective per capita consumption flows – which include consumption of marketed goods and services, government services, and adjustment of effective per capita consumption flows for household production, changing household economies of scale, leisure and life expectancy.
  • Net societal accumulation of stocks of productive resources – which includes net accumulation of tangible capital, housing stocks, net changes in the value of natural resources stocks, environmental costs, net change in level of foreign indebtedness, accumulation of human capital and R&D investment.
  • Income distribution – the intensity of Poverty (incidence and depth) and the inequality of income.
  • Economic security from job loss and unemployment, illness, family break-up and poverty in old age.

 

Until now, this indicator has been applied by Lars Osberg and Andrew Sharpe (Centre for the Study of Living Standards) (1998) in Canada (1998) and in the United States (2001), as weel as to a sample of OECD countries (2002, 2005). More recently, Florence Jany-Catrice and Stephan Kampelmann (Université de Lille 1, Clersé) have proposed a case study for France (2007).

The IEWB allows the comparison the evolution of well-being between different countries and across time.

Basic Principles underlying the IEWB

The construction of the IEWB is based on certain principles. First, this indicator shed light on the necessary transparency of the tool, to allow the accessibility and debates around economic well-being. The legitimacy of the indicator lies in the fact that it has been conceived to reflect the values and conceptions of the indicator’s users. The choices of the dimensions and variables of the IEWB as well as their weight have been based on a particular attention to their consistence with respect to the shared values of a society. To this respect, the authors refer to broadly accepted texts such as the Universal Declaration of Human Rights of the United Nations in order to proceed to some of their technical choices. Moreover, the weights that are affected to each dimension are visible and easily modified.

Results for France

Graph 1 shows that the IEWB for France has increased by far less rapidly than the GDP per capita on the period 1980-2005, notwithstanding a sustained increase in the private consumption. The IEWB even records a decrease from 2002 onwards.

 

Graph 1 GDP and IEWB for France

IEWB 1.JPG

 

Graph 2 allows the identification of the major reasons of these evolutions : dynamism of the productivity and private consumption, contrasting with a certain stability of the inequalities and poverties, as well as with a strong decrease in the economic security in France.

Graph 2 IEWB for France (equal weights)

IEWB 2.JPG

 

See also

External Links

 

Progress, Papers and Publications

  • Florence Jany-Catrice et Stephan Kampelmann (2007). L’indicateur de bien-être économique : une application à la France. Revue française d’économie, n° 1/vol XXII.