Inclusive Wealth Index Research Articles

Sustainable matrix beyond GDP: investment for inclusive growth

Measuring a country’s sustainable development by its gross domestic product (GDP) is insufficient to capture the loss of capital that determines future human welfare. To address this, we propose the inclusive wealth index, which integrates biophysical quantities and monetary values of natural, human, and produced capital. We analyzed the level of Inclusive Wealth in 163 countries over the past 30 years to assess sustainable development goals (SDGs) going beyond GDP. Global wealth has suffered significant losses in natural capital, with the biased accumulation of capital assets leading to unsustainable and unequal development. In low-income countries, soaring population levels and biased capital investments exacerbate the depletion of natural capital. Our results underscore the critical role of natural capital and inclusive capital management in sustainable development. Policymakers can use this information to make capital investments in their economies and promote recovery from COVID-19 that aligns with the SDGs, the Paris Climate Agreement, and initiatives beyond GDP.

Coal resource-based cities at the crossroads: Towards a sustainable urban future

Coal resource-based cities (CRBCs) represent a significant portion of resource-based cities in China, accounting for 40 % of prefecture-level cities. However, existing research on CRBCs primarily focuses on outcome-based sustainability analysis, neglecting production-based evaluation. To bridge this gap, our study investigates sustainability of CRBC using the inclusive wealth index (IWI), IWI per capita, and IWI density. We find substantial variations in CRBCs' inclusive wealth influenced by regional distribution and life stages. Regionally, sustainable development capacity follows the sequence “east > west > central > northeast”, with the northern region benefiting from abundant non-renewable natural capital. In terms of life stage sustainable development, the sequence is “growing > regenerative > grown-up > recessionary”. The decline in wealth performance from growing to recessionary types confirms the negative impact of the “resource curse” phenomenon, where resource dependence hampers growth. However, the regenerative type demonstrates the potential for transformation through sustainable development strategies. Our study presents practical strategies to enhance regional policies by adopting the IWI accounting indicator system proposed by the United Nations Environment Programme and localizing it to align with the characteristics of CRBCs in China. This innovative approach facilitates the evaluation of CRBCs' sustainable development performance.

Sustainable Development Pathways for Chinese Cities: An Assessment of the Advanced Inclusive Wealth Index

AbstractThe inclusive wealth index (IWI) is a stock metric proposed internationally in recent years to measure a region's sustainable development potential. To explore sustainability more comprehensively in this context, this paper improves the inclusive wealth (IW) system proposed by the United Nations Environment Programme by extending the definition of intangible capital and refining the classification of different types of capital. We then used the advanced IWI to investigate the changes in per capita IW and its capital composition in China's 10 National Sustainable Development Agenda Innovation Demonstration Zones from 2010 to 2019, and proposed sustainable development pathways for Chinese cities. Our results underline the fact that IW and capital structure across different types of cities is highly variable. The growth of IW per capita in Shenzhen, an international metropolis, mainly depends on advanced produced capital and intangible capital. For Ordos, however—a resource‐rich “energy city”—the per capita IW is driven by ordinary produced capital and restricted by non‐renewable natural capital, thus showing a low level of sustainability. Through its consideration of four kinds of capital, this study also points out the inequality of human capital between urban‐rural and male‐female groups, and demonstrates how increasing educational attainment helps to promote the transfer of human capital between regions and sectors. In general, a strong potential for sustainable development is linked to the promotion of highly educated human capital, advanced produced capital and intangible capital, while the ecosystem service value of natural capital is also key.

Measuring sustainability: Development and application of the Inclusive Wealth Index in China

It is increasingly common to use the Inclusive Wealth Index (IWI) to evaluate national sustainability; however, IWI's highly aggregated components and limited regional cases restrict its further application in achieving the Sustainable Development Goals (SDGs). This study extends the traditional three-component IWI framework into six disaggregated components, namely male/female human capital, advanced/ordinary produced capital, and renewable/non-renewable natural capital. We apply the modified framework to China and evaluate the sustainability performance at the provincial level. The results show that China continues to develop with an annual IWI per capita increase rate of 2.3%. Gender inequality is found to hinder the growth of IWI, whereas advanced product features benefit the growth of IWI. The results also suggest significant heterogeneity in provincial IWI primarily due to differences in economic development stages, geographic locations, and uneven IWI growth. IWI growth is largely driven by wealth accumulation resulting from human capital and advanced produced capital. In contrast, insufficient IWI growth is caused by a substantial amount of ordinary produced capital or a continued decline in natural capital. The study provides a basis for tracking progress toward the SDGs and measuring the heterogeneity of regional socio-economic development in China.

Inclusive wealth index measuring sustainable development potentials for Chinese cities

The UN Sustainable Development Goals (SDGs) are the blueprint to achieve a better and more sustainable future. To achieve the goal, tracking progress — not just on a national level, but locally — is crucial to guide future policy development. While sustainability assessment at the national evel is quite advanced in China, similar assessments focusing at the regional or even at the city-level are currently lacking. Here, we advanced the Inclusive Wealth Index (IWI) framework, which is firstly proposed by the United Nations Development Programme, through taking water wealth into account and adjusting the variable based on data availability. Then we investigate the sustainability performance of 210 cities in China in 2016 via the advanced version of the IWI framework. The analysis makes a holistic assessment based on produced, human, and natural capital, as well as considering heterogeneities in economy, social, and environmental conditions across these cities. We find that cities clustered in the eastern parts of China are characterized by high levels of sustainability performance and increasing capacities for sustainability, largely driven by their high quality and quantity of human capital. In comparison, the western cities have a large amount of low-skilled human capital and low levels of produced capital, which determines their low sustainability performance. Cities clustered in the north are heavily dependent on low value-added products and resource-intensive industries. Furthermore, we make projections of the IWI and its three components for different cities from 2020 to 2030, referring to the index systems presented in city planning which describe the development speed of income, education, fixed asset investment, forests etc. In the future, cities in central and western clusters show considerable potential for increasing IWI per capita, whereas cities with a dominant energy sector in the north would face declining capacity for sustainability due to the exhaustion of fossil fuels and raw materials. By fully taking account of and adapting to local circumstances, we tailor-design pathways for different types of cities to grow their sustainability potentials. Those resources-dependent cities in the north could avoid the impending decline by gradually developing their human and produced capital while abandoning their resource dependency. Our study contributes to city-level sustainable development in China through the lens of per capita IWI and the potential future dynamics of changing compositions in their capital.

How can developing countries achieve sustainable development: implications from the inclusive wealth index of ASEAN countries

ABSTRACT Since 2015, when the United Nations (UN) established the Sustainable Development Goals (SDGs) for the period 2015–2030, global attention has turned to sustainable development. However, few studies have focused on how countries can achieve sustainable development using comprehensive perspectives and quantitative approaches. In response to this gap, the current study adopts the Inclusive Wealth Index (IWI), which comprehensively evaluates the values of produced, natural, and human capitals that clearly contribute to the sustainable development of nations. By utilizing the IWI, this research carefully explores whether developing countries in the ASEAN region developed in a sustainable way during the period 1990 to 2014. We show that ASEAN countries with rich natural resources had difficulty developing sustainably. In contrast, other countries were able to overcome obstacles to sustainable development by enhancing produced capital, which was partly reflected in their relatively high GDP. To conserve wealth for the future generations, the management of capital resources in a way that reflects regional heterogeneity is key to achieving the SDGs in the ASEAN region.

An appraisal of interlinkages between macro-economic indicators of economic well-being and the sustainable development goals

Recognising the well-known limitations of economic growth as a litmus test of progress and the call by Target 19 of Sustainable Development Goal (SDG) 17 to “develop measurements on progress on sustainable development that complement gross domestic product”, this paper advances understanding of the linkages between alternative measures of economic well-being, the well-being economy and the SDGs. A conceptual model is presented, linking four capital assets to well-being goals and domains, which are connected to related SDGs. An assessment is conducted on the extent to which Gross Domestic Product and five alternative indicators of economic well-being (Environmentally Adjusted Net Domestic Product, Measure of Economic Welfare, Genuine Savings, Genuine Progress Indicator and Inclusive Wealth Index) align with (a) the dimensions of economic well-being, and (b) various environmental, economic, social and institutional targets set by the SDGs. The Genuine Progress Indicator (GPI) is found to be the most comprehensive in coverage, accounting for market-based welfare, services from essential capital, and various environmental and social costs, and linking directly to targets in fourteen of the seventeen SDGs. The paper discusses how greater use of alternative measures of economic well-being by policymakers can encourage transitions to economies which prioritise well-being and desirability objectives.

The inclusive wealth index and sustainable development goals

In September 2015, the United Nations General Assembly agreed on an agenda for sustainable development in member countries. Nations committed themselves to meeting 17 Sustainable Development Goals (SDGs), involving 169 socio-economic targets, by year 2030. To measure progress in meeting those targets, it was proposed to track more than 240 socio-economic indicators over the coming years. What is, however, missing from the list is an indicator that can be used to judge whether the policies that countries follow to meet the targets protect and promote sustainable development. We offer an account of the concept of inclusive wealth report findings that has tracked the inclusive wealth of 140 countries for the period 1992–2014.

SNA and beyond: Towards a broader accounting framework that links the SNA, SDGs and other global initiatives1

The System of National Accounts (SNA) has adapted, and will adapt, as economic, social and environmental conditions change. The revision process of the SNA2008, which is now underway, will take place in the context of developments such as globalization, digitalization, climate change, biodiversity loss, inequality as well as the COVID19-pandemic. The new SNA will have to make clear how the economy relates to concepts such as wellbeing, sustainability and equity and will also need to be linked to major global initiatives such as the Sustainable Development Goals (SDGs). I propose a broad accounting framework for Wellbeing, Sustainability and Equity (WiSE). This provides a wider context for the System of National Accounts (SNA) and links to the other frameworks such as the Sustainable Development Goals, and other global initiatives such as the Better Life Initiative (OECD), Changing Wealth of Nations (World Bank) and the Inclusive Wealth Index (UN). The WiSE framework is not a new system, but rather a combination of existing accounting frameworks which have been proposed in the last five decades. The paper starts off by formulating principles to guide the work on the broader framework. Subsequently, seven accounts are proposed which quantify the various dimensions of the economic, societal and environmental systems. This interdisciplinary accounting framework involves knowledge from many scientific disciplines and multiple units are used (mass, energy, people, time, money etc). The most controversial part of any discussion about the future of the SNA is the valuation of non-market phenomena such as unpaid household work/care or environmental damages. This paper argues that the discussion is too focused on methods derived from welfare economics. Rather than valuation we should be focusing on evaluation methods from many scientific disciplines which help to assess progress towards wellbeing, sustainability and equity. This interdisciplinary perspective should also guide our thinking to select key indicators to replace GDP.

SDGs and Science: Suggestions from Inclusive Wealth Index

SDGs and Science: Suggestions from Inclusive Wealth Index

Sustainability and environmental stewardship: empirical analysis of selected composite indexes

The Kyoto Protocol, the Copenhagen Summit and other World Forums have focused on policies to address global warming, biodiversity and other sustainability issues. A variety of composite indexes has been proposed to examine the sustainability status and environmental stewardship in many different nations. This paper examines a broad spectrum of these composite indexes: Inclusive Wealth Index, Environmental Performance Index, Sustainability Adjusted Global Competitiveness Index (World Economic Forum), Global Sustainability Competitiveness Index (SolAbility), Climate Change Performance Index, Social Progress Index and Global Green Economy Index to investigate their contribution to achieving sustainable development. This analysis enables us to identify appropriate policy directions based on these indexes and current technologies.

Sustainability and environmental stewardship: empirical analysis of selected composite indexes

The Kyoto Protocol, the Copenhagen Summit and other World Forums have focused on policies to address global warming, biodiversity and other sustainability issues. A variety of composite indexes has been proposed to examine the sustainability status and environmental stewardship in many different nations. This paper examines a broad spectrum of these composite indexes: Inclusive Wealth Index, Environmental Performance Index, Sustainability Adjusted Global Competitiveness Index (World Economic Forum), Global Sustainability Competitiveness Index (SolAbility), Climate Change Performance Index, Social Progress Index and Global Green Economy Index to investigate their contribution to achieving sustainable development. This analysis enables us to identify appropriate policy directions based on these indexes and current technologies.

Inequality of health stock and the relation to national wealth

BackgroundThe decline in global and between-country health inequality is a major challenge to overcome. However, few studies have systematically investigated the relationship between inequality of health stock and national wealth. From an economic perspective, health can be viewed as a durable capital stock that produces an output of healthy time. Therefore, in this paper, we focused on health capital to investigate the relationship between inequalities of national health and national wealth.MethodsBased on health stock data from 1990 to 2015 for 140 countries, we estimated Gini coefficients of health stock to investigate associations with a well-known economic flow indicator, Gross Domestic Product (GDP), stock-based national wealth indicator, Inclusive Wealth Index (IWI), and firm-level net income.ResultsThe estimated Gini coefficient of global health stock shows that health stock has experienced a global decline. The Gini coefficient for low-income countries (LICs) showed the fastest decline in health stock, dropping from 0.69 to 0.66 in 25 years. Next, rapid population growth and the rise in the youth share of the working-age population in LICs were most likely contributing factors to the decline in inequality. Most countries that experienced positive health stock growth also indicated a strong positive relationship with GDP and IWI. However, some countries showed a negative relationship with natural capital, which is a part of IWI. In addition, firm-level net income showed no obvious associations with health stock, GDP and IWI.ConclusionsWe argue that a negative relationship between health stock and natural capital is a sign of unstable development because sustainable development involves maintaining not only GDP but also IWI, as it is a collective set of assets or wealth comprising human, produced and natural capital. Moreover, in our analysis of firm-level income data, we also discuss that income will be influenced by other factors, such as innovations, human resources, organization culture and strategy. Therefore, the paper concludes that health stock is a vital component in measuring health inequality and health-related Sustainable Development Goals (SDGs). Thus, IWI is more comprehensive in measuring national wealth and can complement GDP in measuring progress toward sustainable development.

Nigerian briefing: how engineers can help secure a sustainable economy

Nigeria, the most populous country in Africa, has declining natural resources resulting in an unsustainable loss of personal inclusive wealth driven by exporting gas and crude oil for fuel, a landscape desiccated from the legacy of too many large dams, relentless population growth and culturally determined short-termism. Improving outcomes requires well-focused resources management and physical planning. These tasks require well-directed efforts from engineers informed by analysis of evidence of natural resources, human resources and manufacturing. This analysis, practised by economists developing Dasgupta's Inclusive Wealth Index concept, provides direction for achieving sustainability. Providing this direction is the nexus where the planning and management of Nigerian issues with energy (electricity), water (large dams) and land (agriculture) meet. These tasks require engineering inputs. Measures considered include adding value to mineral oil wealth by investment in petrochemicals production rather than exporting crude oil; management of natural water resources to realise the agricultural value of floodplains rather than wasteful water storage for failed irrigation projects; and success with generating and distributing electricity sufficient for economic activity in urban centres where half the people live. Engineers can provide better outcomes for Nigerian people, but there are some important culturally determined constraints to be addressed.

Future inclusive wealth and human well-being in regional Japan: projections of sustainability indices based on shared socioeconomic pathways

This paper evaluates whether future societal trajectories for Japan will occur along sustainable pathways. This work first provides future scenarios for different regions in Japan based on shared socioeconomic pathways (SSPs). Then, we project the inclusive wealth index (IWI) under different future scenarios for 2015–2100. We find that future Japan retains sustainability under all SSPs in 2100 through a comparison with the level of wealth in 2010. However, the trends of IWI per capita are U-shaped, and different regions in Japan will face difficulties caused by unsustainability in the early stages. We also investigate subjective well-being in these projections. Surprisingly, we observe an increase in the well-being index under all SSPs except for SSP5, which focused on promoting economic growth and not on conserving biodiversity. This study provides a framework for evaluating the sustainability of regions, and many indicators are captured in a single index.

Inclusive Wealth Index and Policy Decision

Inclusive Wealth Index and Policy Decision

Comparing sustainable development measurement based on different priorities: sustainable development goals, economics, and human well-being—Southeast Europe case

Sustainability analysis practice has so far proved that measurement of the level of sustainable development (SD) is associated with a large number of methodological difficulties and limitations, related mainly to the selection of indicators, data processing and interpretation of the results. This study is based on an assumption that SD should be measured in ways that depend on the level of development of the country, i.e., it is highly recommended to develop separate sets of indicators to be used for highly developed, medium-developed and poor countries. To that end, we carried out the study on a sample of 13 Southeast European (SEE) countries, and Germany and the Russian Federation for comparison—which are at different levels of development and overall political and socio-economic ambients. The research includes analysis by three different approaches to SD, each based on different sets of indicators: a “GDP approach” which is traditional, and in which economic and GDP-based indicators hold the dominant role; a “Beyond-GDP approach” that reduces the use of economic indicators while increasing the share of social indicators and those based on natural resources; and an “SDG-based approach” that is mainly using indicators of quality of life as defined by the United Nations (UN) SDG. The analysis was performed using the method of composite indicators. Groups of 20 indicators were selected according to their suitability to each of the 3 above-described approaches. The study objective leads to examining ways for measuring development, to suggest new ones, recommend approaches to sustainability planning for the considered SEE countries and beyond, to contribute to the analysis methodology (by assessing usability and reliability of certain indicators and of linkages between them), as well as to rank the countries’ levels of SD under these approaches. Some of the main conclusions are: (a) the indicators having the highest potential impact on the level of SD were foreign direct investments, public debt, energy imports, total natural resources rents, terrestrial and marine protected areas, vulnerable employment, and the Corruption Index; (b) use of the Inclusive Wealth Index is encouraged, so it is important to advance proper methodologies for its measurement; (c) Slovenia and Hungary were the highest-ranked SEE countries under all three approaches, just under Germany; and (d) the ranking order under the SDG-based approach could be used to identify the prioritization of development effort and funding that countries should apply and receive for meeting the SDG. Recommendations for further sustainability measurement were made based on the study’s findings.

Assessing local-scale inclusive wealth: a case study of Sado Island, Japan

Present trends of urbanization are accompanied by increasing demographic and economic shrinkage of rural regions. In countries such as Japan, these rural regions trail behind metropolitan counterparts according to GDP, the conventional measure used to guide governmental policies. Yet, past research suggests that these regions may be undervalued. Further, the Inclusive Wealth Index (IWI), largely only used at the national level, may be able to capture aspects previously missed. As such, our study attempts to highlight the wealth of rural regions by comparing the inclusive wealth of Sado Island and Japan between 1990 and 2014. Minor methodological modifications were made according to data availability at the local level and to improve the accuracy of human capital estimations. Results captured the ongoing shrinkage of Sado and demonstrate the distinct potential of the IWI as a stock measure. Sado’s per capita wealth was about 10% lower than the national averages, but its natural capital was about threefold national averages. Supplementary estimations of the natural capital of fisheries and cultivated forests suggest that inclusion of additional factors in the evaluation would further increase the relative valuation of rural regions. We discuss implications of our estimations for wellbeing, and conclude with a critical appraisal of the IWI calculation towards policy implementation of the index.

Wealth and population growth under dynamic average utilitarianism

AbstractIn wealth accounting and sustainability assessments, we characterize the non-declining wealth criterion under dynamic average utilitarianism (DAU) as defined by Dasgupta (2001). Under DAU, the objective function consists of total intergenerational well-being divided by the present discounted sum of population from the present to the future. It is shown that, in order for an economy to be on a sustainable path, inclusive wealth should grow at a rate higher than the difference between the discount rate and the share of current population of the discounted future population. Our application to the inclusive wealth index shows that, among other results, the DAU criterion changes sustainability assessments for some developing countries with future demographic change, implying that wealth does not accumulate sufficiently in light of DAU. We also show empirical estimates of the value of population change under total utilitarianism, average utilitarianism, and DAU.

Inclusive wealth of regions: the case of Japan

The Inclusive Wealth Index (IWI) is a stock-based comprehensive indicator used to evaluate sustainability based on the wealth of nations, including a finer scale that considers the wealth of regions, in which these indicators are required for governance in the administrative regional hierarchies to achieve Sustainable Development Goals. However, few studies have applied the measure to finer-scale wealth relative to the national level. In this paper, we fill the gap by examining the IWI in all prefectures in Japan, where sustainability is increasingly being lost as a result of depopulation, an aging population, and the excessive burden of environmental regulations. We determined that all regions in Japan maintained sustainability from 1991 to 2000. Then, regional sustainability was lost in 8 prefectures from 2001 to 2005 and in 28 prefectures from 2006 to 2010. This trend is consistent with those found in previous studies, though more severe. The decreasing wealth growth is caused by the increasing damage to health capital, mainly in rural areas, whereas produced capital has had positive effects but has not mitigated the damage. Finally, we illustrate how this index can be applied to evaluate projects in response to the intense debate in regional public policy for rural sustainability through a case study of seawalls as a recovery project in the wake of the Great East Japan earthquake.