For Good Measure

ADVANCING RESEARCH ON WELL-BEING

METRICS BEYOND GDP

Edited by

Joseph E. Stiglitz, Jean-Paul Fitoussi, Martine Durand

•»OECD BETTER POLICIES FOR BETTER LIVES TABLE OF CONTENTS | 7

Table of contents

Foreword 3 Executive Summary 13 Chapter 1. Overview 17 By Elizabeth Beasley 1.1. Introduction 18 1.2. Sustainable Development Goals and the measurement of economic and social progress 20 1.3. Measuring the distribution of household income, consumption and wealth 20 1.4. Horizontal inequalities 22 1.5. Inequality of opportunity 24 1.6. Distributional national accounts 25 1.7. Understanding subjective well-being 26 1.8. Economic security 27 1.9. Measuring sustainability 29 1.10. Trust and social capital 30 Notes 31 References 31 Chapter 2. Sustainable Development Goals and the measurement of economic and social progress 33 By Ravi Kanbur, Ebrahim Patel and Joseph E. Stiglitz 2.1. Introduction 34 2.2. MDGs and SDGs: A briefhistory 34 2.3. The rationale of goal setting 36 2.4. Implications for national policy 38 2.5. The role of statistics at the national level 41 2.6. Measurement atthe global level 43 2.7. Conclusions 45 Notes 45 References 47 Chapter 3. Measuring the distribution of household income, consumption and wealth 49 By Nora Lustig 3.1. Introduction 50 3.2. Measuring economic inequality: Scope and limitations of international databases 52 3.3. Household surveys: Data challenges 55 3.4. The "missing rieh" in household surveys 60 3.5. Broadening the indicators of households' economic well-being 63 3.6. Conclusions 66 Notes 70 References 73 Databases 83

FOR GOOD MEASURE: ADVANCING RESEARCH ON WELL-BEING METRICS BEYOND GDP © OECD 2018 8 | TABLE OF CONTENTS

Chapter 4. Horizontal inequalities 85 By Carmen Diana Deere, Ravi Kanbur and Frances Stewart 4.1. Introduction 86 4.2. Horizontal inequalities 86 4.3. Intra-household inequality and the measurement of money-metric inequality 89 4.4. The gender wealth gap 92 4.5. Conclusions 96 Notes 96 References 97 Chapter 5. Inequality of opportunity 101 By Frangois Bourguignon 5.1. Introduction 102 5.2. Conceptual issues in defining and measuring inequality of opportunity 104 5.3. Practical issues and some stylised facts in measuring inequality of opportunity 111 5.4. Overview of practical issues 129 5.5. Conclusions 130 Notes 133 References 136 Annex 5.A. The difficulty of empirically disentangling the role of opportunity and effort in the determination of eamings 140 Note 141 Chapter 6. Distributional national accounts 143 By Facundo Alvaredo, Lucas Chancel, Thomas Piketty, Emmanuel Saez and Gabriel Zucman 6.1. Introduction 144 6.2. What are the concepts and methods being discussed? 148 6.3. What can we say based on available evidence? First results from WID.world and DINA 153 6.4. Conclusions 158 Notes 158 References 159 Chapter 7. Understanding subjective well-being 163 By Arthur A. Stone and Alan B. Krueger 7.1. Introduction 164 7.2. Continuing issues and new questions 187 7.3. Conclusions 193 Notes 194 References 194 Chapter 8. Economic security 203 By Jacob S. Hacker 8.1. Introduction 204 8.2. What is the State of existing statistics on economic security? .205 8.3. What can we say about economic security based on the available evidence? 220 8.4. Are available statistics adequate to inform policy? 229 8.5. Conclusions 232 Notes 235 References 237

FOR GOOD MEASURE: ADVANCING RESEARCH ON WELL-BEING METRICS BEYOND GDP © OECD 2018 TABLE OF CONTENTS | 9

Chapter 9. Measuring sustainability 241 By Marleen De Smedt, Enrico Giovannini and Walter J. Radermacher 9.1. Introduction 242 9.2. Key concepts and approaches 244 9.3. What is the State of existing capital measures? 248 9.4. Towards a Systems approach to inform policy 264 9.5. Conclusions 273 Notes 276 References 276 Chapter 10. Trust and social capital 283 By Yann Algan 10.1. Introduction 284 10.2. Why does trust matter? 286 10.3. What does trust mean? 289 10.4. What is the State of existing statistics on trust? 292 10.5. What can we say based on available evidence? 300 10.6. Conclusions 311 10.7. Wrapping up 312 Notes 313 References 313

Tables

Table 3.1. Change in inequality 1985-95 to 2000-10 54 Table 3.2. Income and consumption distributions in PovcalNet 57 Table 3.3. Ratio of mean income in household survey to mean household final consumption expenditure per capita in National Accounts, selected Latin American countries 59 Table 3.4. Approaches to address the missing rieh problem in household surveys 62 Table 5.1. Inter-generational transition matrix for eamings 116 Table 6.1. Real income growth across the distribution, 1978-2015 155 Table 7.1. Data collections on subjective well-being undertaken by National Statistical Offices in OECD countries 170 Table 7.2. Summary of methodological issues with subjective well-being measures 176 Table 8.1. Weifare State generosity, 2010 212 Table 8.2. Incidence of risk (market income vs. disposable income) 226 Table 8.3. Number of large year-to-year income drops experienced by individuals over a decade....229

Figures

Figure 3.1. Fiscal redistribution: Change in Gini from two databases 55 Figure 5.1. The relationship between individual circumstances, opportunities and outcomes 105 Figure 5.2. Mean and coefficient of Variation of PISA mathematics scores in OECD countries, 2012 112 Figure 5.3. The Great Gatsby curve 119 Figure 5.4. Non-linear inter-generational elasticity in the United States 120 Figure 5.5. Inequality of outcomes and share due to observed dimensions of inequality of opportunity, selected countries around 2005 123 Figure 5.6. Gender wage gap in selected OECD countries, 1975-2015 126

FOR GOOD MEASURE: ADVANCING RESEARCH ON WELL-BEING METRICS BEYOND GDP © OECD 2018