INTERNATIONAL WELFARE COMPARISON USING GDP AND BETTER LIFE INDEX PARAMETERS

Year 2017, , 1 - 14, 30.03.2017

Olcay Yılmaz

https://doi.org/10.17261/pressacademia.2017.361

Abstract

Purpose-
In this study, an international
welfare comparison is made for OECD members together with selected thirty eight countries using
purchasing power parity (PPP) based on GDP per capita and better life index
(BLI) parameters which is prepared by OECD as an alternative to
welfare measurement. The purpose of this study is to research relations between national income and human
welfare that is generated according to BLI criteria’s.  

Methodology-
For this study, 2016 year data is used. The reasons are: Latvia and
South Africa countries are added in 2016 and 2016 year is the latest edition
for BLI which is renewed itself year by year. In addition when BLI is compared
with GDP, reasons of being preferred PPP numbers are:  One of the variables of BLI which is income
criteria and its indicators incomes and fortunes of households are calculated
by PPP based; PPP gives opportunity to comparison of real good and services
eliminating the differences of price level among countries; in calculation of
PPP, economic factors such as currency fluctuations, interest rates and capital
flows are not taken into account; rather than just National income, PPP based
GDP per capita is more personal like BLI.

Findings- The result obtained from this study is that; when it
examined carefully, countries with high national income per capita cannot score
high in terms of BLI values. At first glance, it can be asserted that there is
a strong positive relation between GDP per capita and BLI parameters by saying
that countries like Norway, Switzerland and Sweden are at the top both in
national income per capita and BLI based rankings; or countries like South
Africa, Mexico, Brazil, Turkey are at the bottom both in national income per
capita and BLI based rankings. However, if there was a strong positive relation
between  GDP per capita and BLI; Luxembourg, which is by far the best in
national income per capita ranking, wouldn’t be placed rank number twelve in
average BLI values ranking. Similarly, New Zealand, which is placed rank number
twenty in national income per capita ranking among thirty eight countries,
wouldn’t be placed rank number seven in average BLI values ranking. These
tangible examples are not limited to a few countries. For example, Ireland,
which ranks fourth in GDP per capita rankings, ranks sixteenth in average BLI
values rankings; Denmark, which ranks twelfth in the national income per
capita, ranks third in terms of average BLI values rankings.

Conclusion- A country’s high level of national income does not
necessarily mean that it is at a level of contemporary civilization. If it is
asked to evaluate a country in terms of welfare perspective; not just only
monetary value of produced goods and services in that country shouldn’t be
taken into account  but also factors such
as education, justice, employment, security, environment and social connections
should be taken into account from a wider perspective.

Keywords

Better Life Index, OECD, international welfare comparison

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