Extending the Genuine Savings estimates with natural capital and poverty at the regional and national level in Italy

Abstract

Efforts to improve the Genuine Savings, a widely accepted index to assess the weak sustainability of an economy's development, have led to the creation of a broad body of literature that aims to produce more robust macroeconomic indicators for policy decision making. However, the various approaches to natural capital welfare accounting results in conflicting indicators of change. It is also the case that the inclusion of natural and social capital components is still scant. This paper addresses this gap by extending the traditional Genuine Savings methodology by including some natural capital components (e.g. flood protection, water purification) and the poverty dimension through a deontological approach. Although not offering a silver bullet solution, our approach proposes a pluralist and pragmatic improvement from ‘weak’ towards ‘stronger’ sustainability indicators. Results highlight the availability of data and information produced by different initiatives including the United Nations System of Environmental-Economic Accounting guidelines. The empirical application provides Genuine Savings estimates for Italy from 2006 to 2012 and from 2012 to 2015, shedding the light on the importance of natural capital and social considerations at national and regional level.