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Inclusive Income Accounts: Practical Measures to Go Beyond GDP

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  • Heys, Richard
  • Taylor, Cliodhna

Abstract

It is well known that Gross Domestic Product (GDP) is an incomplete measure of economic welfare. In particular, it excludes the value associated with natural and human capital. This paper develops two new measures, Gross and Net Inclusive Income as analogues to GDP and Net National Disposable Income (NNDI), using internally consistent National Accounts methods and existing data-sources to extend the scope of welfare measurement. Using exchange values, GII and NII do not incorporate externalities but do clarify trade-offs between the economic, environmental and social domains. This paper also presents and comments on experimental results. For example, after adjusting for atmospheric degradation, growth in the UK’s NII between 2008 and 2019 is faster than GDP growth, as traditional measures exclude efforts to reduce carbon emissions, suggesting that traditional productivity measures which exclude efforts to reduce carbon emissions may underestimate the extent of innovation in the UK.

Suggested Citation

  • Heys, Richard & Taylor, Cliodhna, 2024. "Inclusive Income Accounts: Practical Measures to Go Beyond GDP," Discussion Papers escoe-dp-2024-19, Economic Statistics Centre of Excellence.
    • Handle: RePEc:eoe:escoed:escoe-dp-2024-19
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    References listed on IDEAS

    as
    1. Carol Corrado & Charles Hulten & Daniel Sichel, 2009. "Intangible Capital And U.S. Economic Growth," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(3), pages 661-685, September.
    2. Diane Coyle, 2015. "GDP: A Brief but Affectionate History (Revised and Expanded Edition)," Economics Books, Princeton University Press, edition 2, number 10598, December.
    3. Matthew Agarwala & Josh Martin, 2022. "Environmentally-adjusted productivity measures for the UK," Working Papers 028, The Productivity Institute.
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    Keywords

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    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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