Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/263903 
Year of Publication: 
2022
Series/Report no.: 
Working Paper No. 015.2022
Publisher: 
Fondazione Eni Enrico Mattei (FEEM), Milano
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.
Subjects: 
Gross domestic product
well-being indicators
data reduction techniques
principal component analysis
random matrix
JEL: 
C43
I30
I31
Document Type: 
Working Paper

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