A transparent index of well being accounting for mortality: Poverty Adjusted Life Expectancy

Poverty and mortality are the two major sources of well-being losses. We propose new summary indicators of well-being that account for mortality while being (i) conceptually sound, (ii) easily interpretable and implementable and (iii) sensitive to the distribution of well-being. Our main indicator is the poverty-adjusted life expectancy index. Following the expected life-cycle utility approach a la Harsanyi, it is based on a single normative parameter that transparently captures the trade-off between poverty and mortality. Empirically, we compare countries over time and focus on these situations in which mortality is in conflict with poverty. Once we assume that being poor is (at least weakly) preferable to being dead, we find that about a third of these conflicting comparisons can be unambiguously ranked by the poverty-adjusted life expectancy index. Finally, this indicator naturally defines a new and simple index of multidimensional poverty, the expected deprivation index, which also accounts for unequal lifespans.