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social welfare

GDP is Not Destiny

Roxanne Bauer's picture
In a 1968 speech, Robert Kennedy recognized gross national product “measures everything in short, except that which makes life worthwhile.”

Secretary General of the United Nations Ban Ki Moon agreeed in 2012 suggesting, “We need to move beyond gross domestic product as our main measure of progress, and fashion a sustainable development index that puts people first,” and Nobel Prize-winning economist Joseph Stiglitz said in 2008, “GDP tells you nothing about sustainability.”

Even Simon Kuznets, who first coined the term GDP acknowledged in his original report to the US Congress 1934 that, "The welfare of a nation can scarcely be inferred from a measurement of national income."

Taking up the call for a better, more wholesome way to measure progress, the Social Progress Index, offers a framework for measuring the multiple aspects of social progress based on three dimensions: basic needs for survival, foundations of wellbeing, and opportunity.  It does not measure how much money is spent on policies or services that support these dimensions, but rather the experiences of citizens.

Michael Green, CEO of the Social Progress Index, gives the following Ted Talk to explain how the index measures the welfare of societies and what its policy implications are. He reveals a dramatic reordering of nations according to social progress.
What the Social Progress Index can reveal about your country

Does More Income Mobility = Higher Social Welfare?

William Maloney's picture

Man fixing railroad tracks, Mexico. Photo credit: Curt Carnemark / World Bank

Income mobility is usually considered a good thing. It implies higher social welfare as the ability of individuals to move up and down the income ladder mitigates the impacts of poor income distribution. But it is also true that when income jumps up and down unexpectedly, life becomes riskier and planning, difficult. This is why making a general link between the mobility we observe in the data and welfare is not straightforward.

Does More Income Mobility = Higher Social Welfare?

William Maloney's picture
 Curt Carnemark / World BankIncome mobility is usually considered a good thing. It implies higher social welfare as the ability of individuals to move up and down the income ladder mitigates the impacts of poor income distribution. But it is also true that when income jumps up and down unexpectedly, life becomes riskier and planning, difficult. This is why making a general link between the mobility we observe in the data and welfare is not straightforward.


A common approach used to show high mobility is a low correlation of present and past incomes is captured, for instance, by the Hart index (cov lnyt, lnyt-1). If we assume, as is often done, that an individual’s income is comprised of a transitory component (short-term blips up or down in a self-employed person’s income that we can smooth, or even measurement error), and a permanent component where each income shock is persistent (say, an income loss after an involuntary job change (an AR (1) process with autoregressive coefficient, ρ), then the Hart index can be broken into three parts.

Growth, Top Incomes, and Social Welfare

Aart Kraay's picture
Trends in income inequality are at the center of development policy discussions these days.  Part of this renewed attention is no doubt a tribute to Thomas Piketty’s pioneering work to measure top income shares using income tax data, as well as his much-discussed new book.  Piketty’s work shows some dramatic trends in inequality at the top end of the income distribution.  For example, in countries such as C

Growth, Inequality, and Social Welfare: Cross-Country Evidence

LTD Editors's picture

Social welfare functions that assign weights to individuals based on their income levels can be used to document the relative importance of growth and inequality changes for changes in social welfare. This method is applied in a new working paper by David Dollar, Tatjana Kleineberg, and Aart Kraay. They find that, in a large panel of industrial and developing countries over the past 40 years, most of the cross-country and over-time variation in changes in social welfare is due to changes in average incomes. In contrast, the changes in inequality observed during this period are on average much smaller than changes in average incomes, are uncorrelated with changes in average incomes, and have contributed relatively little to changes in social welfare.

Where Rubber Hits the Road: Reforming Public Sector Management

Otaviano Canuto's picture

In practice, theory is something else. I've already heard variants of this expression in several countries and languages. Very often from people referring to the gap between abstract, generic principles and the implementation of projects and policies.