Comparing the welfare of growing economies

Abstract

Economies that currently have the same productive capacity may implement different growth rates. This entails that it is insufficient to base international comparisons of welfare solely on current well-being, or introducing the potential for future growth in an arbitrary manner. NNP-based measures trade off current well-being and the potential for future growth in a consistent manner. This paper shows that it matters for nnp-based measures whether different growth rates in different economies are due to different technological opportunities or different social preferences for development. The analysis illustrates the similarity between international comparisons of welfare and interpersonal comparisons of well-being.

Available in DUO with permission from Revue d' Economie politique.