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Measuring cultural and social dimensions of economic development: challenges and opportunities. Righi A., Tronti L.

Measuring cultural and social dimensions of economic development: challenges and opportunities. Righi A., Tronti L.

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  • 1. Measuring cultural and social dimensions of economic development: challenges and opportunities Alessandra Righi (Istat) and Leonello Tronti (Civil Service Department) Workshop SIS-VSP 2011 - Rome, April 28-29
  • 2. Rome, April 28-29 2011 Contents
    • Relevance of human and social capital for development
    • Relationships between human and social capital
    • Istat strategy of approach
    • Towards a unifying perspective
    Workshop SIS-VSP 2011
  • 3. Rome, April 28-29 2011 1. Relevance of human and social capital for development The scientific literature has long pointed out the importance of the cultural and social dimensions of economic development for understanding both economic growth and non-monetary aspects of social development (f.i. Becker, 1964; Coleman, 1988; Putnam et al. 1993). According to a recent OECD work: “the improvement in human capital has been one of the key factors behind the growth process of the past decades in all OECD countries, but especially so in Germany (mainly in the 1980s), Italy, Greece, the Netherlands and Spain, where the increase in human capital accounted for more than half a percentage point acceleration in growth with respect to the previous decade” (OECD and Statistics Canada, 2000). Similar considerations have been made on the role of social capital (Knack and Keefer, 1997; Helliwell and Putnam, 1995; Guiso et al. , 2004). Workshop SIS-VSP 2011
  • 4. Rome, April 28-29 2011 1. Relevance of human and social capital for development
    • Furthermore, recently the concepts of social capital and human capital have finally assessed their importance not only for understanding and easing present economic development, but also for assuring its sustainability for future generations. Diapositiva 5
    • Unfortunately, a sometimes harsh theoretical debate has not yet succeeded in producing appropriate measures and indicators, as also recognized by:
      • the Stiglitz-Sen-Fitoussi Report,
      • the First Report of the Task Force for Measuring Sustainable Development of the Joint UNECE-Eurostat-OECD Working Group on Statistics for Sustainable Development.
    Workshop SIS-VSP 2011
  • 5. Rome, April 28-29 2011 Workshop SIS-VSP 2011 Figure 1 introduces some of the main concepts that are used in this presentation and shows how capital, welfare and wellbeing are related. Diapositiva 4 Human wellbeing and its relation to capital (UNECE, 2011)
  • 6. Rome, April 28-29 2011 1. Relevance of human and social capital for development
    • Measurement attempts have failed to reach results widely shared (nationally or internationally). For this reason, NSIs have long been delayed in building the conceptual framework and producing indicators on these issues.
    • Consequently, the lack of information on these crucial elements of development has not improved or even weakened:
      • the ability of individuals to make informed choices on their education and training paths,
      • no less than that of policy makers to guide collective choices on such important issues as fertility, education, health, social participation or the organisation of the workplaces.
    • NSIs have recently decided to assume, anyhow, the responsibility and take brave and forward-looking decisions. The commitment has been shared internationally, so to overcome together the relevant, remaining difficulties.
    Workshop SIS-VSP 2011
  • 7. Rome, April 28-29 2011 1. Relevance of human and social capital for development
    • The relevance of HC in the economic theory has stimulated the search for indicators to measure the aggregate stock in each country.
    • Apart from the World Bank approach, based on a methodology of residual type (2006), the main approaches are:
    • the cost-based , which takes account of tangible, intangible and opportunity costs that allow for the rearing and education of each individual,
    • the income based , in which the effects of investment in human capital are measured by the discounted lifetime income;
    • the education based ,
      • with indicators on the stocks and the operation of the education system ( input ),
      • as well on students’ cognitive capabilities ( output ), measured by international surveys on learning, skills and competencies.
    Workshop SIS-VSP 2011
  • 8. Rome, April 28-29 2011 1. Relevance of human and social capital for development
    • In the latest years there has been a flowering of studies related to the application of the income-based method, according the Jorgenson-Fraumeni approach (Jorgenson, Fraumeni, 1992).
      • This approach is used by the NIS’s participating in the Consortium of the OECD Human Capital Project (OECD, 2009; Mira, Liu, 2009), that aims at the production of harmonized internationally comparable measures of human capital.
    • According to a review of 13 recent papers on this topic (Righi, Baldassarini, 2011):
      • 10 papers follow the income-based approach,
      • 2 papers both the income-based and the cost-based approach;
      • only in the Netherlands an hypothesis of a satellite account is followed (Bos, 2009).
    • So, as it happened for environmental accounts, progress in the study of HC will arrive primarily from the deepening of the concept of stock, and only afterwards from a really integrated social and economic accounting.
    Workshop SIS-VSP 2011
  • 9. Rome, April 28-29 2011 2. Relationships between human and social capital
    • Coleman (1988) states that “ human capital is created by changes in persons that bring about skills and capabilities that make them able to act in new ways ”.
    • This statement includes the “classical” view of Mincer and Becker on human capital, but it opens the door for giving a particular importance to social and also natural capital:
      • A highly-skilled labour force is usually associated with the prevalence of norms and networks and with good quality institutions facilitating social cooperation, underpinning higher levels of investment in physical capital and potentially favouring strategies to renew the natural environment.
      • But the development of human capital itself is stimulated by the surrounding social environment and by the networks, as network membership provides access to important information, and informal relationships facilitate the transfer of implicit knowledge, thus improving the efficacy of learning.
    Workshop SIS-VSP 2011
  • 10. Rome, April 28-29 2011 2. Relationships between human and social capital
    • Even if there is still not enough scientific literature on this point, the profound and continuous interaction between human and social capital seems quite evident.
      • According World Bank and OECD there is a “clear complementarity link” between human capital and social capital.
    • Schuller (2001), however, believes that the conceptual paradigm of social capital is opposed to that of human capital, as it gives importance
      • to the collective dimension ,
      • rather than to the simple attainment of individual self-interest .
    Workshop SIS-VSP 2011
  • 11. Rome, April 28-29 2011 2. Relationships between human and social capital
    • In Schuller’s opinion, the underlying implication of a human capital perspective is that:
      • investment in knowledge and skills brings economic returns individually,
      • and thereafter collectively.
    • Furthermore, both HC and SC may be considered only partly a direct investment (i.e. consciously chosen by the individual),
      • as they are partly an indirect one (the result of ties and opportunities deriving from the family, social or working environment).
    Workshop SIS-VSP 2011
  • 12. Rome, April 28-29 2011 3. Istat strategy: social capital
    • The 2002 Istat Social Capital Project has tackled the measurement of social capital (defined according to the OECD) by mapping the sources and information inside Istat and other public agencies, in order to construct a Matrix of surveys and questions.
    • Four main dimensions have been identified:
      • Social participation,
      • Social networks and aids,
      • Trust,
      • Reciprocity.
    • And a set of key indicators has been constructed, divided up in themes and sub-themes.
    • Consequently, a Matrix of indicators for dimensions and themes concerning social capital at territorial level has been developed.
    Workshop SIS-VSP 2011
  • 13. Rome, April 28-29 2011 3. Istat strategy: human capital
    • In the last decade, Istat has set forth many activities referring to:
      • the improvement of the HC measurement capability of surveys/specific databases,
      • the development of studies on the stock and returns of HC.
    • Recently, based on the mentioned experiences, and particularly on the participation to the OECD Human Capital Project, Istat has set a coherent and internationally harmonized strategy that aims at both:
      • producing current measures on the HC stock,
      • and advancing in the construction of a satellite account for HC.
    • The human capital stock (on the demand side) is measured according to the lifetime labour income approach (J-F), limited to the working population (15-64 years) by sex and 3 or 4 levels of education, with breakdowns by employee/self-employed statuses and economic activity sectors.
      • At this stage, only the economic activities in the System of National Accounts are considered.
    Workshop SIS-VSP 2011
  • 14. Rome, April 28-29 2011 4. Towards a unifying perspective
    • To take into account both SC and HC, we need a new conceptual framework on which to build measurement.
      • Towards this unifying perspective , it has been proposed the concept of Relational Goods (RGs):
        • as the social connections among HC holders that value and transform HC into SC, bringing about development (Brunetta, Tronti, 1995).
    • We therefore consider the working hypothesis of a conceptual framework in which individual HC, through RGs (networks and social ties), achieve the coordination and the spreading of information, common values and trust that constitute SC.
    • And we would like to include in the measurement framework also other, not strictly economic outcomes of the HC-RGs-SC cycle , among which:
      • at an individual level: better health conditions, culture, human relationships,
      • at a social level: civicness, political and social participation, entrepreneurship, low criminality.
    Workshop SIS-VSP 2011