AN EMPIRICAL ESTIMATE OF THE RELATION BETWEEN TWO MEASURES OF ECONOMIC WELFARE*

Vladimir Stoikov

Review of Income and Wealth, 1971, vol. 17, issue 3, 299-305

Abstract: The main objective of this paper is to explore and quantify the difference between two measures of comparative economic welfare: (a) the more or less conventional measure of per capita national income, and (b) the capitalized value of expected future income per capita. The paper begins with a brief summary of the argument in favor of the present value of expected future income per capita as a measure of economic welfare. This is followed by an examination of the empirical relationship of the ratio of the suggested alternative measure to per capita income and an analysis of the variables used to compute the present value of expected income per capita. The main conclusion drawn from the calculations is that very substantial differences occur in the measurement of relative economic well‐being depending on which measure is used. A final section discusses the implications of this finding for international comparisons of economic welfare.

Date: 1971
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