The relevance of Index of Sustainable Economic Wellbeing. Case study of Ecuador

Abstract

The gross domestic product is usually the indicator used to measure economic progress worldwide. However, GDP growth does not necessarily reflect the well-being of a nation, since there are cases of countries where there is economic growth measured by GDP; But, there is poverty, unemployment and inequality. For this reason, we Calculated the Index of Sustainable Economic Welfare (ISEW) using the information of Ecuador a Latin American developing country for the period 2001–2015. Additionally, we compared (ISEW) with the GDP as progress indicators, emphasizing the difference between welfare and economic growth. The results show that from the positive components, personal consumption is the one that contributes the most to the increase of ISEW, while the degradation of natural capital affects negatively, in a greater proportion, Ecuadorians welfare; the existence of the gap between the ISEW and the GDP is confirmed, so it’s deduced that welfare in Ecuador is overestimated, demanding analysis and institutional reform.

Keywords

• Index of sustainable economic welfare (ISEW)
• GDP
• Welfare
• Economic growth