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Beyond GDP: Using equivalent incomes to measure well-being in Europe

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  • Koen DECANCQ
  • Erik SCHOKKAERT

Abstract

It has become widely accepted that focusing exclusively on income growth may lead to a too narrow-sighted measure of changes in well-being. People care about other dimensions of life, such as their health, employment, social interactions and personal safety. Moreover, an exclusive focus on income growth remains blind to the distribution of income and well-being in the society. We propose therefore a set of five principles for a richer measure of well-being. In particular, we advocate the use of a measure based on “equivalent incomes”, which satisfies these principles. We discuss and illustrate how this equivalent income approach can be implemented in Europe, using the ESS data for 2008 and 2010. We find that introducing inequality aversion and including other dimensions in the analysis leads to a remarkably different perspective on the growth of well-being in Europe. Copyright Springer Science+Business Media Dordrecht 2016
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  • Koen DECANCQ & Erik SCHOKKAERT, 2016. "Beyond GDP: Using equivalent incomes to measure well-being in Europe," LIDAM Reprints CORE 2795, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:2795
    Note: In : Social Indicators Research, 126(1), 21-55, 2016
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