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Economic growth, inequality, and well-being

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  • Howarth, Richard B.
  • Kennedy, Kevin

Abstract

In advanced industrial societies, rising levels of inequality have contributed strongly to the observed gap that has emerged between per capita income and the Index of Sustainable Economic Welfare (ISEW), which in its current versions is known as the Genuine Progress Indicator (GPI). Yet the ISEW/GPI approach to measuring the social costs of inequality has been criticized as ad hoc. The present paper reviews the literature on this topic and efforts to resolve it based on the construction of indicators grounded in: (a) a classical utilitarian ethical framework; and (b) empirical evidence on the relationship between income and well-being. In the United States, after-tax income per capita grew at an annual rate of 1.7% between 1979 and 2011. A growth rate of 1.2% per year arises when income is adjusted to account for the social costs of inequality. The most common adjustment used in ISEW/GPI studies yields a similar growth rate despite much smaller subtractions from baseline income.

Suggested Citation

  • Howarth, Richard B. & Kennedy, Kevin, 2016. "Economic growth, inequality, and well-being," Ecological Economics, Elsevier, vol. 121(C), pages 231-236.
  • Handle: RePEc:eee:ecolec:v:121:y:2016:i:c:p:231-236
    DOI: 10.1016/j.ecolecon.2015.10.005
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    Cited by:

    1. Marina Malkina, 2017. "Social Well-Being of the Russian Federation Regions," Economy of region, Centre for Economic Security, Institute of Economics of Ural Branch of Russian Academy of Sciences, vol. 1(1), pages 49-62.
    2. repec:gam:jsusta:v:9:y:2017:i:5:p:711-:d:97133 is not listed on IDEAS
    3. repec:eee:ecolec:v:159:y:2019:i:c:p:157-176 is not listed on IDEAS
    4. repec:eee:tefoso:v:137:y:2018:i:c:p:288-303 is not listed on IDEAS
    5. Jackson, Tim & Victor, Peter A., 2016. "Does slow growth lead to rising inequality? Some theoretical reflections and numerical simulations," Ecological Economics, Elsevier, vol. 121(C), pages 206-219.
    6. Taylor, Lance & Rezai, Armon & Foley, Duncan K., 2016. "An integrated approach to climate change, income distribution, employment, and economic growth," Ecological Economics, Elsevier, vol. 121(C), pages 196-205.
    7. Armon Rezai & Sigrid Stagl, 2016. "Ecological Macreconomics: Introduction and Review," Ecological Economics Papers ieep9, Institute of Ecological Economics.
    8. Hardt, Lukas & O'Neill, Daniel W., 2017. "Ecological Macroeconomic Models: Assessing Current Developments," Ecological Economics, Elsevier, vol. 134(C), pages 198-211.

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