Discounting GDP for Pollution, Waste Generation and Natural Resources Depletion

A Comparative Analysis of selected High, Middle and Low income countries.

Abstract

GDP represents the money value of all final goods and services produced and traded within the domestic territory of a country in a given period of time. But it cannot reflect the economic loss of natural resources and the use of natural resources by people. It shows the size of the economy but ignores the environmental externalities and the cost of environmental depletion. This paper attempts to develop a new indicator, so called discounted GDP to quantify the cost of pollution, waste generation and natural resources depletion across high income, middle income and low-income countries with the help of a general calculation methodology (Stjepanovic, Tomic and Skare, 2017) by using secondary data collected from World Development Indicator (WDI) since, the year 2000.  This paper also compares the discounted GDP with GDP between the countries like high income, middle income and low-income groups.  A sample of 35 countries out of 193 member countries of UN is taken and divided it into three groups such as high, middle and low- income groups. The selection of countries is based on GDP, PPP (Constant International Dollar, 2017). 10 countries from high income groups, 16 countries from middle income groups and 9 countries from low-income groups are selected respectively. Our analysis viewed that there is a small gap between the discounted GDP and GDP in high income countries than the middle and low-income countries and also our results could serve to encourage further discussion and debates on green growth and environmental sustainability. This paper suggests that there is a need to bridge the gap of the lack of data availability and methodological improvements regarding the environmental aspects along with the economic growth.