Measuring Sustainable Development: Wealth and Adjusted Net Savings

1
Measuring Sustainable Development Wealth and
Adjusted Net Savings

• Glenn-Marie Lange
• Environment Department
• The World Bank

2
Wealth Savings

• Substantial theoretical literature has shown that
• economic well-being depends on wealth
• sustainable development depends on maintaining
  per capita wealth
• So, we want to monitor wealth and changes in
  wealth, adjusted net savings (Genuine Savings)

3
Estimating wealth, four steps
(1) Total capital (2) Produced capital (3) Natural capital (4) (1)-(2)-(3) Intangible capital
Method used Present Value of consumption Perpetual Inventory Method Present Value of rents cost Difference
Assets included By definition, all assets that contribute to national consumption Machinery, equipment and infrastructure Urban land Sub-soil assets resources (timber and non-timber) Crop and pasture land Protected areas Human capital Governance Institutional effectiveness All other assets not measured in column (2) and (3)
4
Testing genuine saving

• Theory suggests that positive genuine saving
  today should lead to growth in consumption in the
  future
• Ferreira and Vincent (2005) and Ferreira,
  Hamilton and Vincent (2008) test this using the
  World Banks 30 year time series of saving
  estimates
• For developing countries the relationship holds,
  but not for rich countries (where innovation and
  technology are arguably the engine of growth)
• Further testing would benefit from improved
  accounts

5
Issues and research priorities for future work

• Conceptual issues
• Data improvement
• Promoting use of wealth savings accounts

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Issues addressed in the forthcoming report, The
Changing Wealth of Nations

• Conceptual issues
• Intangible capital and understanding the residual
• Alternatives to market exchange rates for
  international comparisons (PPP)
• Capital gains and depletion of exhaustible
  resources
• Improving data for the wealth saving accounts
• Incorporating wealth accounts compiled by
  national statistical offices
• Drawing on national research programs

7

• Issues for future work include
• Including missing natural capitalcertain
  minerals, fisheries, water
• Identifying thresholds and non-linearities in the
  natural world
• Valuing biodiversity
• Inventorying and valuing environmental services
• Estimating elasticities of substitution for
  resources

8
Promoting use of wealth accounting

• The Changing Wealth of Nations will promote
  partnerships with World Bank units, especially
  operational units
• Macroeconomics
• Management of rents from minerals, EITI
• Use by country and regional units
• We are looking for partnerships outsidepossibly
  UNEP, the World Wealth Report,
• 1st meeting in January 2010