IDEAS home Printed from https://ideas.repec.org/p/ags/feemwp/324043.html
   My bibliography  Save this paper

E pluribus, quaedam. Gross domestic product out of a dashboard of indicators

Author

Listed:
  • Guerini, Mattia
  • Vanni, Fabio
  • Napoletano, Mauro

Abstract

Is aggregate income enough to summarize the well-being of a society? We address this longstanding question by exploiting a novel approach to study the relationship between gross domestic product (GDP) and a set of economic, social and environmental indicators for nine developed economies. By employing dimensionality reduction techniques, we quantify the share of variability stemming from a large set of different indicators that can be compressed into a univariate index. We also evaluate how well this variability can be explained if the univariate index is GDP. Our results indicate that univariate measures, and GDP among them, are doomed to fail in accounting for the variability of well-being indicators. Even if GDP would be the best linear univariate index, its quality in synthesizing information from indicators belonging to different domains is poor. Our approach provides additional support for policy makers interested in measuring the trade offs between income and other relevant socio-economic and ecological dimensions. Furthermore, it adds new quantitative evidence to the already vast literature criticizing GDP as the most prominent measure of well-being.

Suggested Citation

  • Guerini, Mattia & Vanni, Fabio & Napoletano, Mauro, 2022. "E pluribus, quaedam. Gross domestic product out of a dashboard of indicators," FEEM Working Papers 324043, Fondazione Eni Enrico Mattei (FEEM).
    • Handle: RePEc:ags:feemwp:324043
    DOI: 10.22004/ag.econ.324043
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/324043/files/NDL2022-015.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.324043?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Luzzati, T. & Gucciardi, G., 2015. "A non-simplistic approach to composite indicators and rankings: an illustration by comparing the sustainability of the EU Countries," Ecological Economics, Elsevier, vol. 113(C), pages 25-38.
    2. Hoekstra,Rutger, 2019. "Replacing GDP by 2030," Cambridge Books, Cambridge University Press, number 9781108497336.
    3. Jeyhun I. Mikayilov & Fakhri J. Hasanov & Marzio Galeotti, 2018. "Decoupling of C02 Emissions and GDP: A Time-Varying Cointegration Approach," IEFE Working Papers 101, IEFE, Center for Research on Energy and Environmental Economics and Policy, Universita' Bocconi, Milano, Italy.
    4. Claudio Barbieri & Mattia Guerini & Mauro Napoletano, 2021. "The anatomy of government bond yields synchronization in the Eurozone," SciencePo Working papers Main hal-03373853, HAL.
    5. Iyetomi, Hiroshi & Nakayama, Yasuhiro & Yoshikawa, Hiroshi & Aoyama, Hideaki & Fujiwara, Yoshi & Ikeda, Yuichi & Souma, Wataru, 2011. "What causes business cycles? Analysis of the Japanese industrial production data," Journal of the Japanese and International Economies, Elsevier, vol. 25(3), pages 246-272, September.
    6. Alexei Onatski, 2010. "Determining the Number of Factors from Empirical Distribution of Eigenvalues," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 1004-1016, November.
    7. Kalimeris, Panos & Bithas, Kostas & Richardson, Clive & Nijkamp, Peter, 2020. "Hidden linkages between resources and economy: A “Beyond-GDP” approach using alternative welfare indicators," Ecological Economics, Elsevier, vol. 169(C).
    8. Huguet Ferran, Pau & Heijungs, Reinout & Vogtländer, Joost G., 2018. "Critical Analysis of Methods for Integrating Economic and Environmental Indicators," Ecological Economics, Elsevier, vol. 146(C), pages 549-559.
    9. Malay, Olivier E., 2019. "Do Beyond GDP indicators initiated by powerful stakeholders have a transformative potential?," Ecological Economics, Elsevier, vol. 162(C), pages 100-107.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. GUO-FITOUSSI, Liang, 2013. "A Comparison of the Finite Sample Properties of Selection Rules of Factor Numbers in Large Datasets," MPRA Paper 50005, University Library of Munich, Germany.
    2. repec:zbw:bofitp:2019_008 is not listed on IDEAS
    3. Nine Klaassen & Arno Scheepens & Bas Flipsen & Joost Vogtlander, 2020. "Eco-Efficient Value Creation of Residential Street Lighting Systems by Simultaneously Analysing the Value, the Costs and the Eco-Costs during the Design and Engineering Phase," Energies, MDPI, vol. 13(13), pages 1-18, June.
    4. Maurizio Daniele & Winfried Pohlmeier & Aygul Zagidullina, 2018. "Sparse Approximate Factor Estimation for High-Dimensional Covariance Matrices," Working Paper Series of the Department of Economics, University of Konstanz 2018-07, Department of Economics, University of Konstanz.
    5. Matteo Luciani & David Veredas, 2012. "A model for vast panels of volatilities," Working Papers 1230, Banco de España.
    6. Matteo Barigozzi & Antonio M. Conti & Matteo Luciani, 2014. "Do Euro Area Countries Respond Asymmetrically to the Common Monetary Policy?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 76(5), pages 693-714, October.
    7. Li, Hongjun & Li, Qi & Shi, Yutang, 2017. "Determining the number of factors when the number of factors can increase with sample size," Journal of Econometrics, Elsevier, vol. 197(1), pages 76-86.
    8. Shuquan Yang & Nengxiang Ling & Yulin Gong, 2022. "Robust estimation of the number of factors for the pair-elliptical factor models," Computational Statistics, Springer, vol. 37(3), pages 1495-1522, July.
    9. Alain-Philippe Fortin & Patrick Gagliardini & O. Scaillet, 2022. "Eigenvalue tests for the number of latent factors in short panels," Swiss Finance Institute Research Paper Series 22-81, Swiss Finance Institute.
    10. Wei, Jie & Chen, Hui, 2020. "Determining the number of factors in approximate factor models by twice K-fold cross validation," Economics Letters, Elsevier, vol. 191(C).
    11. Asl, Mahdi Ghaemi & Canarella, Giorgio & Miller, Stephen M., 2021. "Dynamic asymmetric optimal portfolio allocation between energy stocks and energy commodities: Evidence from clean energy and oil and gas companies," Resources Policy, Elsevier, vol. 71(C).
    12. Yunjung Kim & Cheolbeom Park, 2020. "Are exchange rates disconnected from macroeconomic variables? Evidence from the factor approach," Empirical Economics, Springer, vol. 58(4), pages 1713-1747, April.
    13. Fan, Jianqing & Liao, Yuan & Shi, Xiaofeng, 2015. "Risks of large portfolios," Journal of Econometrics, Elsevier, vol. 186(2), pages 367-387.
    14. İshak Demi̇r & Burak A. Eroğlu & Seçi̇l Yildirim‐Karaman, 2022. "Heterogeneous Effects of Unconventional Monetary Policy on the Bond Yields across the Euro Area," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(5), pages 1425-1457, August.
    15. Antonia Arsova, 2019. "Exchange rate pass-through to import prices in Europe: A panel cointegration approach," Working Paper Series in Economics 384, University of Lüneburg, Institute of Economics.
    16. Mao, Guangyu & Shen, Yan, 2019. "Bubbles or fundamentals? Modeling provincial house prices in China allowing for cross-sectional dependence," China Economic Review, Elsevier, vol. 53(C), pages 53-64.
    17. Ali Babikir & Henry Mwambi, 2016. "Evaluating the combined forecasts of the dynamic factor model and the artificial neural network model using linear and nonlinear combining methods," Empirical Economics, Springer, vol. 51(4), pages 1541-1556, December.
    18. Luke Hartigan & James Morley, 2020. "A Factor Model Analysis of the Australian Economy and the Effects of Inflation Targeting," The Economic Record, The Economic Society of Australia, vol. 96(314), pages 271-293, September.
    19. Yongfu Huang & Muhammad G. Quibria, 2015. "The global partnership for sustainable development," Natural Resources Forum, Blackwell Publishing, vol. 0(3-4), pages 157-174, August.
    20. Gábor Pellényi, 2012. "The Sectoral Effects of Monetary Policy in Hungary: A Structural Factor Analysis," MNB Working Papers 2012/1, Magyar Nemzeti Bank (Central Bank of Hungary).
    21. Pellényi, Gábor, 2012. "A monetáris politika hatása a magyar gazdaságra. Elemzés strukturális, dinamikus faktormodellel [The sectoral effects of monetary policy in Hungary: a structural factor]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(3), pages 263-284.

    More about this item

    Keywords

    Environmental Economics and Policy; Labor and Human Capital; Political Economy; Production Economics;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:feemwp:324043. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/feemmit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.