Comprehensive versus inclusive wealth accounting and the assessment of sustainable development: An empirical comparison

Abstract

This paper compares alternative wealth estimates reported by the World Bank and in the Inclusive Wealth Reports. Although theoretical limitations and shortcomings are widely acknowledged in the literature, the extent to which the alternative approaches to wealth accounting matter empirically is not well known. Comparing the alternative data in levels, shares, growth rates, and monetary sustainability indices derived from them, major differences emerge between OECD and non-OECD countries. For the former, the alternative wealth estimates seem complementary, but only if a key assumption made in the derivation of inclusive wealth is violated. For the latter, the data seem much less useful. For example, depending on which data source is used, for the group of low income countries the share of natural capital in total wealth is either 36.8% or 60.4%, suggesting that extreme care must be taken if the composition of wealth were to be used to inform policy-making. Neither wealth data set provides a ‘definite guide’ to economic sustainability, but a combination of indices derived from both might be useful in a holistic assessment of sustainability.