Human Welfare, Consumption & Income Inequality

Human Welfare Expenditure represents the household-related components of GDP that most closely relate to the welfare of human beings. Comparative data for all countries is taken primarily from the UN, which presently maintains national accounts information in a common standard format called System of National Accounts (SNA) for 70 countries. The calculation of HWE starts with the household consumption expenditure (HCE) component of GDP as the base, thereby omitting other GDP components related to capital formation, change in inventories, imports and exports. It then adds in those categories of government expenditure directly related to personal welfare (HWGE), including education (Ed), health (He), housing and community amenities (HC), social protection (SP), environmental protection (EP), recreation, culture and religion (RCR), thereby omitting expenditure on general public services, defense, public order and safety, and economic affairs. The sum of the above two components is divided by the total population to derive the per capita HWE. Then per capita HWE is adjusted for 2005 international dollars PPP. On average the value of HWE ranges between 60 and 80% of GDP.

Please find the working paper here.