Welfare vs. Income Convergence and Environmental Externalities

33 Pages Posted: 18 Jan 2018

See all articles by Geoffrey J. Bannister

Geoffrey J. Bannister

International Monetary Fund

Alexandros Mourmouras

International Monetary Fund (IMF) - Policy Development and Review Department

Date Written: December 2017

Abstract

We present estimates of welfare by country for 2007 and 2014 using the methodology of Jones and Klenow (2016) which incorporates consumption, leisure, mortality and in equality, and we extend the methodology to include environmental externalities. During the period of the global financial crisis welfare grew slightly more rapidly than income per capita, mainly due to improvements in life expectancy. This led to welfare convergence inmost regions towards advanced country levels. Introducing environmental effects changes the welfare ranking for countries that rely heavily on natural resources, highlighting the importance of the natural resource base in welfare. This methodology could provide a theoretically consistent and tractable way of monitoring progress in several Sustainable Development Goal (SDG) indicators.

Keywords: Environment, Income, Production, Welfare, convergence, externalities, Equity, Justice, Inequality, and Other Normative Criteria and Measurement, Health Production: Nutrition, Mortality, Morbidity, Disability, and Economic Behavior, Comparative Studies of Countries

JEL Classification: D63, E21, E23, E24, I12, O57, Q56

Suggested Citation

Bannister, Geoffrey J. and Mourmouras, Alexandros, Welfare vs. Income Convergence and Environmental Externalities (December 2017). IMF Working Paper No. 17/271, Available at SSRN: https://ssrn.com/abstract=3104541

Geoffrey J. Bannister (Contact Author)

International Monetary Fund ( email )

700 19th St. NW
Washington, DC 20431
United States
202-623-9421 (Phone)
202-623-4237 (Fax)

Alexandros Mourmouras

International Monetary Fund (IMF) - Policy Development and Review Department ( email )

700 19th St. NW
Room 5-311
Washington, DC 20431
United States
202-623-5402 (Phone)
202-589-5402 (Fax)

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