Inclusive Wealth Research Articles

SDGs and Science: Suggestions from Inclusive Wealth Index

SDGs and Science: Suggestions from Inclusive Wealth Index

Measuring inclusive wealth of China: Advances in sustainable use of resources

The inclusive wealth approach is increasingly common to measure the sustainable development of the countries. It comprised the natural, human and produced capital of nations to measure social wellbeing. We measure the inclusive wealth of the provinces in China from 2000 to 2015 and reports the sustainable use of the resources. We identify that three types of capital have increased to varying degrees, with produced capital increasing by 615.6%, natural capital increasing by 33.8%, and human capital increased by 337.0%. The total amount of inclusive wealth has increased by 300.4% in the past 15 years. However, the provinces in China are still facing unbalanced development across the country compared to developed nations. The use of the natural capital, more specifically now-renewable resources, has been restricting the wealth growth in some provinces. Although ecological services account for a small proportion of the total inclusive wealth, more attention is essential for sustainable development. Meanwhile, the rapid growth of carbon damages posed threat to future wealth accumulation. Innovative, coordinated, green, open and shared development are the goals of China 13th and 14th five-year plan and our inclusive wealth of China will be key measurement tool of this achievement.

Ecosystem wealth in the Barents Sea

We develop an inclusive wealth type index for natural capital in the Barents Sea that accounts for ecosystem services via trophic interactions. We consider three key fish species in the Barents Sea under stochastic growth dynamics. Compared to evaluation at market prices, the estimated wealth from the inclusive wealth approach is several times higher. Ecosystem wealth depends on the management scheme, and we consider both business as usual (BAU) and an optimized ecosystem-based management scheme (EBM). While BAU maintains wealth near its current level (5% increase in the long run), EBM increases wealth with almost 20% in the short run and more than 25% in the long run. Realized shadow prices suggest that prey species stocks are undervalued when evaluated at market prices.

Inclusive wealth with total factor productivity: global sustainability measurement

Non-technical abstractWealth commonly refers to the measure of the value of all assets or capital owned by an individual, community, company or nation. Sustainable development requires that the per capita productive base or comprehensive wealth of an economy should at least not decline over a period of time. We present here a comprehensive assessment of cross-country productivity over a study period of 1990–2010 for 140 countries. We used the concept of inclusive wealth introduced by the United Nations to assess the social value, rather than dollar price, of all each country's assets, including produced, human and natural capital.

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.

Available capital, utilized capital, and shadow prices in inclusive wealth accounting

Previously, accounting for comprehensive or inclusive wealth has focused on the supply side of capital assets. However, human well-being created by capital assets inherently depends on the demand side as well. In particular, if capital is not utilized at its full capacity, then realized or actual human well-being may be less affected by available capital than by effective or utilized capital. In principle, this notion is embodied in a shadow price, which is defined as the marginal contribution of capital assets to social well-being. The shadow price becomes higher if the underlying resource allocation mechanism improves. In practice, one can account for such underutilization by adjusting shadow prices to reflect only the utilized quantity of the capital in question. Furthermore, capital utilization has different, nuanced implications for produced, human, and natural capital, and its implications even vary across some classes of natural capital. Within this line of theoretical thought, we provide empirical estimates of the changes in inclusive wealth and sustainability of selected developing countries in recent years by comparing available and utilized capital assets. We find that sustainability assessments may be revised based on utilized capital, due to, among others, human capital underemployment and non-renewable natural capital accessibility.

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.

Inclusive wealth in the twenty-first century: a summary and further discussion of Inclusive Wealth Report 2018

It is increasingly common to judge the sustainable development of nations by non-declining social well-being. Determinants of social well-being have been measured and used for sustainability analysis. In particular, inclusive wealth per capita, which comprises produced, human, and natural capital, was reported in the Inclusive Wealth Report in 2012 and 2014. Here, we report the updates of the third edition of the report, which covers 140 countries from 1990 to 2014. In per capita terms, only 60% out of 140 countries show non-declining wealth for the past quarter century. Most countries, both developed and developing, fall into the group of running down natural capital and increasing produced and, to a lesser extent, human capital. We also include fishery stock as part of natural capital, and we find that only a few countries have increased their fishery capital in the studied period. Inclusive wealth has typically grown much less than GDP per capita and does not resemble change in other development indices. Globally aggregated produced and human capital per capita increased 94% and 28%, respectively, while natural capital per capita declined by 34%. In 2014, produced, human, and natural capital account for 24%, 64%, and 11%, respectively, which is similar to the recent findings by the World Bank. In addition, inclusive wealth is approximately 12 times GDP on average, much higher than conventional wealth-income ratios globally, and is at least at par with those ratios in high-income countries under financialization.

Are carbon dioxide emission reductions compatible with sustainable well-being?

Efforts to reduce carbon dioxide (CO2) emissions remain elusive due to the strong correlation with economic development. The progress of economic development therefore needs to be assessed by considering the harmful effects of CO2 emissions as a loss of intergenerational well-being. This has been the motivation behind the development of the inclusive wealth (IW) index, which is proposed as a viable alternative to the conventional gross domestic product for tracking the progress towards the well-being of a nation. By using nonparametric machine learning methods, this study aims to explore the impact of CO2 emission reduction on well-being under the IW framework via three different energy pathways, namely, the supply, mix and efficiency pathways, involving 105 countries from 1992 to 2014. Results showed that the lowest growth in global CO2 emissions was projected by the efficiency scenario, which forecasted an increase by 2040 of 15.12% relative to the 2014 level. However, this scenario might lead to a potential loss in future well-being by up to 0.3%, compared to the two other scenarios. These findings suggest that the commitment to CO2 emission reduction needs to be evaluated cautiously by considering its impact on intergenerational well-being, particularly for developing economies. In contrast, high-income economies were encouraged to set up a more ambitious target of CO2 emission reduction since doing so would also lead to a potential increase of their intergenerational well-being. This study verifies a robust link between sustainable development and CO2 emission mitigation scenarios, which is essential for promoting future climate actions.

Natural disasters, climate change, and their impact on inclusive wealth in G20 countries.

This paper uses the 1990-2010 natural disaster and carbon emission data of G20 countries to examine the impact of natural disasters and climate change on the natural capital component of inclusive wealth. Our study shows that climate change and GDP have no positive impacts on the growth of natural capital. By contrast, trade openness and natural disaster frequency contribute to the accumulation of natural capital in G20 countries. There is an inverted U-shaped relationship between the growth of natural capital and the magnitude of natural disaster. Natural capital growth is not affected very much by small disasters. By contrast, large disasters tend to make the growth of natural capital fall sharply.

Backward- and Forward-looking Shadow Prices in Inclusive Wealth Accounting: An Example of Renewable Energy Capital

Attaching weights to the list of capital assets is crucial in inclusive wealth accounting and sustainability assessments. These weights, or shadow prices, can be constructed in theory by looking prospectively at future social profits that the capital in question is expected to yield. In practice, however, both backward- and forward-looking shadow prices are used. This study confirms that these two approaches are theoretically equivalent under strong assumptions and reviews how and why the two approaches are taken. The two approaches are then applied to renewable energy capital (REC), which has rarely been done in either produced or natural capital accounting and sustainability assessments. Renewable energy capital provides an ideal example with which to compare the two approaches, as it is a class of produced capital that substitutes both produced and natural capital. The numerical results of both approaches demonstrate that renewable energy capital starts to account for as large a share as natural capital does, if not produced capital or inclusive wealth, in those countries where natural capital is poorly endowed and investment in renewable energy capital has been witnessed.

Evaluating the Efficiency of Forestry Policy for Inclusive Growth in Ghana

The study evaluates the efficiency of forestry policy implemented in Ghana, where about 70% of the population depends on forest resources for livelihood and cultural purposes. It sought to assess how efficiently forestry policy had been implemented in Ghana, to inform policy on how benefits of forestry policy could promote inclusive growth. It employs an inclusive wealth framework to ascertain the social opportunity cost due to forestry policy implementation in Ghana, an indicator of the economic welfare effect of the policy. The results show negative net divergence in revenue due to forestry policy implementation, indicating a distorting influence of forestry policy on Ghana’s forestry sector, creating increasing inefficiency. Computed summary ratios – Nominal Protection Coefficient, Effective Protection Coefficient and Subsidy Ratio to Producers, confirmed that forestry policy implementation in Ghana had induced lower economic welfare in the country. Ghana will need to apply the holistic model, with special emphasis on the economic and social subsectors to ensure that implemented forestry policy leads to inclusive growth.Keywords: Efficiency, Forestry policy, Ghana, Inclusive growth, Policy analysis matrix

Economic Growth and Sustainable Development in Indonesia: An Assessment

We explore the nexus between sustainability and economic growth in Indonesia between 1990 and 2014, using an inclusive wealth framework that covers the country’s unique resources and biodiversity. Indonesia’s inclusive wealth growth is considered positive. However, the ‘dilution effect’ on Indonesia’s population has outpaced the country’s wealth growth, so that its per capita inclusive wealth growth has been negative. This study implies that the GDP per capita growth in Indonesia does not necessarily indicate sustainability. The depreciation of both renewable and non-renewable natural capital is driving the decline in wealth per capita. Despite this, sustainability has been improving, although marginally, due to increases in the rates of produced and human capital growth. To return to a sustainable growth path, Indonesia must increase its investments to a net gain in the rate of wealth growth, and it must reduce its resource extraction to levels that its productive base can maintain.

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.

The multi-layer nature of Inclusive Wealth data and their dynamic interpretation

This paper explores inclusive wealth (IW) index using visual interfaces, which provide better economic interpretation. Two views are provided for the visual representation: a cluster view and a timeline view. Among all variables of IW data we focus on three: natural capital, inclusive wealth and air pollution. Our IW data exploration starts with the task of illustrating the distribution of air pollution and wealth among different geographical regions and among regions of different economic growth over the 25-year period 1990–2014. Furthermore, we aim at the assessment of variation of natural capital across the years of study. We use different data visualization techniques to capture the multi-layer nature of IW data, to represent parts of the global multi-region multi-country dataset.

Valuing natural capital and ecosystem services: a literature review

Literatures on sustainability have developed dramatically over recent decades. These literatures have not only added an enormous number of dimensions, but also have challenged researchers to be able to conduct a comprehensive analysis of sustainability. The excessive use of natural capital (NC) might cause a decrease in sustainability. Depleting a type of NC and substituting it with another form of NC or with produced capital is not sustainable in the strong sense. In this review, we have focused on the importance of NC and ecosystem preservations for sustainable development. We value the NC of 140 nations by adopting the inclusive wealth approach. We also notice the impact of climate change and natural disaster on different geographic regions in the assessment of NC.

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.

Energy infrastructure and their impacts on societies’ capital assets: A hybrid simulation approach to inclusive wealth

Measuring how energy policy affects intergenerational well-being is a problematic task policymakers face. There is a compelling need for a comprehensive evaluation criterion that is versatile enough to allow for exploring different possibilities and options. The inclusive wealth framework is a suitable tool for such a task, as it accounts for the changes in the three major capital assets –produced, human, and natural- that compose a nation's wealth. Here, we apply the inclusive wealth framework within a hybrid simulation model to evaluate energy infrastructure projects in terms of their impacts on different capital assets. We chose hybrid simulation as a technique that allows for a better realization of technologies, as well the economy as a whole. The developed model is generalized and can be applied to different economies as well as all types of energy projects. In addition to accounting for the capital assets, we also account for CO2 damages and health capital. We provide the simulation for different proposed projects representing different fuel cycles in Belgium and Egypt. The results show how the model can be used to demonstrate the changes brought to wealth by the different projects and how policymakers can change policies to make wealth take more favorable tracks.

Inclusive Wealth Index and Policy Decision

Inclusive Wealth Index and Policy Decision