Moving beyond GDP for Measuring Welfare – Estimating the Level and Rate of Growth of Health Adjusted Income

Angela Chang , Danish Institute for Advanced Study
Dean Jamison, University of California San Francisco

Background: Gross domestic product (GDP) is often used as a proxy for quality of life. Yet, material gains is only one of the many aspects of wellbeing, and Nobel-winning economists Kenneth Arrow and William Nordhaus argued the most important aspects of welfare is the value of human lifespan. A “full-income approach” to capture both monetary income and the value of changes in mortality is preferred to GDP or GDP growth. However, existing literature has two shortcomings: they confuse the concepts of levels of life expectancy with changes in life expectancy, and existing approaches only apply to high-income countries and cannot be expanded to lower-income countries. Methods: Our framework, named “health-adjusted income”, captures both the GDP and the monetary values of health and longevity of populations. It addresses the limitations mentioned above by distinguishing the differences between levels and changes. We explore several simple and defensible approaches for assigning values for changes in mortality for all countries. We compare changes in health-adjusted income across time and geographies, and decompose the changes into four parts. Findings: We provide estimates for 195 countries between 1970-2015, and highlight several interesting comparisons, including France versus United States, India versus China, and within China over time. Interpretation: Health-adjusted income provides a more comprehensive picture of how countries’ welfare has changed over time and how they fare compared to similar countries. In a time of worldwide political change, a more comprehensive welfare metric that captures population health should be provided to and used by policymakers.

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 Presented in Session P3. Poster Session Migration, Economics, Environment, Methods, History and Policy