Question

what is the UN inclusive wealth index and how is it measured ?

Answer 1

Inclusive wealth index was introduced in the inclusive wealth report published by UNU- IHDP and UNEP(United Nations Environment Programme) in 2012.lt aims to replace indices like gross domestic product (GDP) and human development Index (HDI)

Inclusive wealth index is a tool that asseses the country's ability to look after its wealth in a way that's sustainable and safeguards it's future generations.The stocks of natural human and manufactured capital is considered to be a measure of inclusive wealth.

Measurement of inclusive wealth index

Inclusive wealth index is a sum of the lndices representing three kinds of capital, natural human and manufactured. It is difficult to calculate Such an index accurately. But we do have various methods of scientific measurement and economic techniques for estimateing each kind of pital is ccapitall.Human capital is calculated by dividing it into its health and educational aspects, Separating the contribution to the stock of human capital in terms of health into health capital and the contribution in terms of education into education capital.

With respect to natural capital its value as resources used directly in our lives can be derived from market prices and the amount available, however it is difficult to estimate the indirect effect that natural capital has on us.

Denoting produced, human and natural capital as K,H, and N we have the following equivalence between inclusive wealth (IW) and wellbeing.

W(K(t),H(t),N(t))=V(t)

Whre W is IW

Final version of lWI will be as follows

IWl=pk K+ph H+pn N

Pk ,ph and pn are the marginal shadow prices of produced human and natural capital, respectively.