Abstract
Gross domestic product (GDP) is shown to possess three new desiderata. First, GDP is almost perfectly correlated over time with the first principal component of its three classical indicators. Second, this principal component is in a class of weighted indexes ancillary to GDP. Each ancillary index informs policy as to allocation of resources over the three GDP indicators. Third, a country-specific power of GDP almost perfectly predicts the United Nation’s Human Development Index (HDI). These findings are brought by principal components and regression analyses of time series supplied by the World Bank and the United Nations. Axiomatic HDI computation is carried out without survey sampling, probabilistic inference, significance testing, or even HDI data.
Highlights
Gross domestic product (GDP) is shown to possess three new desiderata
These findings are brought by principal components and regression analyses of time series supplied by the World Bank and the United Nations
Household expenditure and domestic savings were introduced as elements of GDP during the Great Depression in 1936 by John Maynard Keynes in his General Theory of Employment, Interest and Money (Keynes 1936)
Summary
This paper views GDP’s three classic constituents as separate time-varying indicators. The HDI measures a nation’s health and educational results rather than expenditures, along with its standard of living calibrated by gross per capita income. Resting on Marchante, Ortega, and Sánchez (Marchante et al 2006), the OECD, and the Sarkozy report (Stiglitz et al 2010), Ferrara and Nisticò (2013) constructed a well-being index containing another augmented HDI, along with indicators measuring equal opportunity in the labor market, competitiveness, and quality of the socio-institutional context. They found that regional convergence in Italy over 2004–2010 ordered as: their augmented HDI alone, their entire well-being index, and per-capita GDP.
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