Environmental health risks, welfare and GDP

Abstract

A seemingly overlooked impact on economic well-being is rising health risks attributed to the environment, which are impacting welfare worldwide. We modify the consumption-equivalent macroeconomic welfare measure developed by Jones and Klenow (2016) to include the impacts of these risks on life expectancy and the utility flow of the average individual. Employing the Global Burden of Disease dataset of environmentally related mortality and morbidity across 163 countries over 1990–2019, we compare welfare with and without environmental health risks to GDP per capita for each country relative to the United States. In addition, we examine the extent to which welfare in rich and poor countries converge. Across all 163 countries over 1990–2019, adjusting welfare for environmental health risks is significant when compared to income (GDP) per capita or to welfare that excludes these risks. This divergence in welfare is especially prominent among low and lower middle-income countries.