A Pragmatic Approach to Embedding Equity Considerations into Growth-Focused Policy

This paper presents an approach to embedding equity into measurements of economic growth and subsequently many environmental and public policy decisions. Building on Atkinson’s equally distributed equivalent (EDE) concept, economic growth is decomposed into distribution-preserving and inequality-monitoring components. A measure of society’s inequality aversion is then estimated geometrically, followed by EDE growth as a resulting simple transformation from mean growth. The approach is implemented on data from the LIS, OECD, and World Bank covering 130 country–datasets from the 1970's to 2022. Advanced economies typically display inequality-increasing growth which depresses EDE growth relative to mean growth, whereas many developing economies exhibit inequality-reducing trajectories that raise EDE growth. Replacing mean growth with EDE growth in the Simple Ramsey Rule approach to social discounting modifies many national recommendations -- modestly on average but materially when inequality dynamics are pronounced, altering the valuation of long-lived public projects and assets. JEL codes: D63, H43, O43