E pluribus, quaedam. Gross domestic product out of a dashboard of indicators

Mattia Guerini, Fabio Vanni and Mauro Napoletano
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Fabio Vanni: Università degli Studi dell'Insubria, GREDEG, CNRS, Université Côte d'Azur and Institute of Economics, Sant'Anna School of Advanced Studies

No 2022.15, Working Papers from Fondazione Eni Enrico Mattei

Abstract: Is aggregate income enough to summarize the well-being of a society? We address this longstanding question by exploiting a novel approach to study the relationship between gross domestic product (GDP) and a set of economic, social and environmental indicators for nine developed economies. By employing dimensionality reduction techniques, we quantify the share of variability stemming from a large set of different indicators that can be compressed into a univariate index. We also evaluate how well this variability can be explained if the univariate index is GDP. Our results indicate that univariate measures, and GDP among them, are doomed to fail in accounting for the variability of well-being indicators. Even if GDP would be the best linear univariate index, its quality in synthesizing information from indicators belonging to different domains is poor. Our approach provides additional support for policy makers interested in measuring the trade offs between income and other relevant socio-economic and ecological dimensions. Furthermore, it adds new quantitative evidence to the already vast literature criticizing GDP as the most prominent measure of well-being.

Keywords: Gross domestic product; well-being indicators; data reduction techniques; principal component analysis; random matrix (search for similar items in EconPapers)
JEL-codes: C43 I30 I31 (search for similar items in EconPapers)
Date: 2022-06
New Economics Papers: this item is included in nep-hap
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Related works:
Working Paper: E pluribus, quaedam. Gross domestic product out of a dashboard of indicators (2022)
Working Paper: E pluribus, quaedam. Gross domestic product out of a dashboard of indicators (2022)
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