E Pluribus, Quaedam: Gross Domestic Product out of a Dashboard of Indicators

15 Pages Posted: 1 Jul 2022

See all articles by Mattia Guerini

Mattia Guerini

University of Brescia - Department of Economics and Management; GREDEG CNRS; Scuola Superiore Sant'Anna di Pisa

Fabio Vanni

Observatoire Français des Conjonctures Economiques (OFCE)

Mauro Napoletano

Université de Nice Sophia Antipolis - Groupe de Recherche en Droit, Economie et Gestion (GREDEG); Observatoire Français des Conjonctures Economiques (OFCE); SKEMA Business School; Scuola Superiore Sant'Anna di Pisa - Laboratory of Economics and Management (LEM)

Date Written: June 30, 2022

Abstract

Is aggregate income enough to summarize the well-being of a society? We address this longstanding question by exploiting a novel approach to study the relationship between gross domestic product (GDP) and a set of economic, social and environmental indicators for nine developed economies. By employing dimensionality reduction techniques, we quantify the share of variability stemming from a large set of different indicators that can be compressed into a univariate index. We also evaluate how well this variability can be explained if the univariate index is GDP. Our results indicate that univariate measures, and GDP among them, are doomed to fail in accounting for the variability of well-being indicators. Even if GDP would be the best linear univariate index, its quality in synthesizing information from indicators belonging to different domains is poor. Our approach provides additional support for policy makers interested in measuring the trade offs between income and other relevant socio-economic and ecological dimensions. Furthermore, it adds new quantitative evidence to the already vast literature criticizing GDP as the most prominent measure of well-being.

Keywords: Gross domestic product, well-being indicators, data reduction techniques, principal component analysis, random matrix

JEL Classification: C43, I30, I31

Suggested Citation

Guerini, Mattia and Vanni, Fabio and Napoletano, Mauro, E Pluribus, Quaedam: Gross Domestic Product out of a Dashboard of Indicators (June 30, 2022). FEEM Working Paper No. 15, 2022, Available at SSRN: https://ssrn.com/abstract=4150304 or http://dx.doi.org/10.2139/ssrn.4150304

Mattia Guerini (Contact Author)

University of Brescia - Department of Economics and Management ( email )

Via S. Faustino 74/b
Brescia
Italy

GREDEG CNRS ( email )

Sophia-Antipolis
France

Scuola Superiore Sant'Anna di Pisa ( email )

Pisa, 56127
Italy

Fabio Vanni

Observatoire Français des Conjonctures Economiques (OFCE) ( email )

69 Quai d'Orsay
Paris 75004
France

Mauro Napoletano

Université de Nice Sophia Antipolis - Groupe de Recherche en Droit, Economie et Gestion (GREDEG) ( email )

250, rue Albert Einstein
Valbonne, 06560
France

Observatoire Français des Conjonctures Economiques (OFCE) ( email )

60, rue Dostoïevski
Sophia-Antipolis Cedex, 06902
France

HOME PAGE: http://www.ofce.sciences-po.fr

SKEMA Business School ( email )

60 rue Dostoïevski
Sophia Antipolis, 06902
France

Scuola Superiore Sant'Anna di Pisa - Laboratory of Economics and Management (LEM) ( email )

Piazza Martiri della Liberta, 33
Pisa, I-56127
Italy

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