2. What is Inclusive Growth?
• IMF definition of inclusive growth has three components: it is
economic growth that is inclusive and sustainable.
• Economic growth refers to increases in the production of goods and
services that are valued by people, providing the means for a better
standard of living.
3. • Inclusion refers to broadly sharing these improvements in living
standards among all groups of society, as well as across regions and
with a view to protecting future generations
• Inclusion can be summarized by four general objectives: (1) benefit-
sharing; (2) opportunity; (3) participation; and (4) empowerment:
4. Sustainability
• In order to be sustainable, growth must also be sustainable.
Sustainable means that the current path of consumption and social
welfare can be sustained into the future for future generations.
• It also means that we need to maintain environmental sustainability,
ensuring that future generations have the same opportunity to
benefit from the natural bounty of the Earth.
5. How Do Other Institutions Define Inclusive
Growth
• For example, the European Commission defines inclusive growth as “a
high-employment economy delivering economic, social and territorial
cohesion.”
• There are several concepts used by other institutions and scholars
that are related. For example, the World Bank uses a concept of
“shared prosperity” which refers to an increase in the share of the
bottom 40 percent of the income distribution.
• Some researchers analyze “pro-poor” growth, defined as poor people
increasing their income in absolute terms (Ravallion and Chen, 2003)
6.
7. GDP and Alternative Measures of Wellbeing
• Gross domestic product, or GDP, is the most common measure of
economic activity and well-being
• National statistical agencies of countries measure and report GDP in
the system of national accounts.
• GDP measures the value of economic activity that takes place and
receives payment in markets, as shown below.
• Measurements of GDP also include other indicators of economic
welfare such as household consumption and disposable income,
investment, government services, and net trade.
8. Shortcomings of GDP
• However, GDP excludes aspects of economic production such as
household nonmarket production and free digital services.
• GDP also neglects to adjust for the detrimental effects of depletion of
natural resources but includes spending on services that reflect the
need to overcome societal ills, such as payments for security to
protect against crime.
9. Alternative measures of economic welfare
• An alternative measure of economic welfare would therefore require
making some adjustments to include the value of household
nonmarket production, and to deduct the depletion of natural
resources and degradation of the environment.
• The adjusted measure of economic welfare also needs to account for
the distribution of income and wealth, for access to financial services
and to basic public services such as health and education, and for the
creation of high-quality jobs
• These additional indicators are among those that are relevant for
analyzing inclusive growth.
10. Broader well-being measures
• Beyond economic welfare, there are other indicators or measures
that would be useful for a broader measure of social well-being.
• This includes factors such as safety or low crime rates, civic
engagement and governance, community, and other aspects of
happiness and life satisfaction.
11. “Gross Happiness Index
• Some countries, institutions, and economists have developed other
measures of the health of an economy and the wellbeing of its
people.
• For example, Bhutan introduced the “Gross Happiness Index” and its
four pillars: (1) environmental conservation, (2) suitable and equitable
socio-economic development, (3) preservation and promotion of
culture, and (4) good governance
12. “Human Development Index
• The United Nations Development Program publishes its “Human
Development Index” in annual Human Development Reports. The
index combines life expectancy, education, and income into a
composite measure.
• The OECD constructs a “Better Life Index” for each of its member
countries. The index compares 11 topics that it considers essential for
material living conditions and the quality of life.
http://www.oecdbetterlifeindex.org/.
