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Sustainability, welfare and efficiency of nations

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Abstract

Adjusted net saving (ANS) has emerged as a leading indicator of sustainability. In addition, changes in ANS translate into changes in welfare (Hamilton in World Bank Econ Rev 13(2):333–356, 1999). This document uses a new data envelopment analysis model to assess efficiency of countries taking into account not only GDP creation but also sustainability and welfare by adding ANS in the set of desirable outcomes. Given that ANS can be negative a new anti-efficiency DEA model allowing for negative data recently proposed by DiMaria (2018) is used. Combining efficiency and anti-efficiency greatly increases discrimination of countries and proposes a more accurate ranking of countries.

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Notes

  1. See Liu et al. (2017) for a presentation of other indicators commonly used to assess sustainability.

  2. Rent = World price-mining cost-milling and beneficiation costs-smelting costs-transport to port-‘normal’ return to capital.

  3. The consumption of fixed capital results from the application of the perpetual inventory method and depends on assumptions made on survival function of capital and hypothetical average lifetime of capital goods.

  4. Energy inputs could be added, at the cost of reducing the number of countries under investigation, and production should be used instead of GDP that is output minus intermediate consumption that includes energy inputs.

  5. Linear programs were solved using the R package lpSolve version 5.6.13.

  6. The distribution of efficiencies resulting from model 3 being symmetric, the sample is ranked by increasing efficiencies and divided in four groups of similar size (17 countries, 15 for the high efficiency group) defining the low efficiency, lower-middle, upper middle and high efficiency groups. It would be similar to chose quartiles to split the sample.

  7. Lets take the hypothetical example of a country that would have achieved 0 GDP and 0 ANS it wont be argued to decommission all capital stocks and to fire all workers. Rather than reducing inputs and keeping level of GDP constant (then gaining in efficiency), countries should be more efficient in combining inputs to increase GDP.

  8. https://ec.europa.eu/epale/en/resource-centre/content/depth-analysis-adult-learning-policies-and-their-effectiveness-europe.

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Acknowledgements

The author gratefully acknowledge the support of the Observatoire de la Compétitivité, Ministère de l’Economie, DG Compétitivité, Luxembourg and STATEC.

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  1. Centre Administratif Pierre Werner, STATEC Research, 13 rue Erasme, BP304, 2013, Luxembourg, Luxembourg

    C.-H. DiMaria

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Correspondence to C.-H. DiMaria.

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DiMaria, CH. Sustainability, welfare and efficiency of nations. Qual Quant 53, 1141–1163 (2019). https://doi.org/10.1007/s11135-018-0809-3

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