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The Sustainable Welfare Index for Italy, 1960-2013

Mirko Armiento

No 1601, Working Papers from University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini

Abstract: This paper presents a new alternative measure to GDP ? the Sustainable Welfare Index (SWI) ? a modified version of the Index of Sustainable Economic Welfare (ISEW) developed by Daly and Cobb (1989). Expressed in monetary terms, it provides a synthetic indicator of progress, with a comprehensive view of social and economic welfare and of environmental sustainability. While its methodology has been revised several times ? a new version including additional items is also referred to as Genuine Progress Indicator (GPI) ? ISEW represents an appropriate starting point for the extension developed in this paper. SWI is calculated for Italy over the period 1960-2013, providing a novel series of data mapping the growth and decline of the national sustainable welfare. The proposed SWI allows a direct comparison with GDP data and includes methodological adjustments with respect to ISEW. In measurement terms it focuses on flows and eliminates variables reflecting stock values; it circumscribes the coverage of social and environmental factors relevant for identifying sustainable welfare and is calculated as the sum of 14 separate components. Empirical results show that from 1960 to 1991 per capita GDP and per capita SWI have evolved in parallel, with the aggregate monetary value of sustainable welfare being significantly lower than GDP figures. Italy?s SWI reached its peak in 1991, then stabilised with significant oscillations and has shown a sharp decline since the start of the 2008 crisis; in 2013 per capita GDP is back to the level of 1997, while per capita SWI is back to 1985. Italy?s SWI appears to confirm the so-called ?threshold? hypothesis (Easterlin, 1974; Daly, 1977; Max-Neef, 1995), describing a situation in which the negative effects of economic growth on social and environmental conditions overcome the benefits of additional units of GDP. This evidence is supported by a detailed theoretical and methodological discussion and by a sensitivity analysis. Length: 41 pages

Keywords: Socio-economic development; Welfare measures; Beyond GDP; Index of Sustainable Economic Welfare (ISEW); Italy (search for similar items in EconPapers)
JEL-codes: E01 I31 Q57 (search for similar items in EconPapers)
Date: 2016, Revised 2016
New Economics Papers: this item is included in nep-env and nep-mac
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