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St Catharine's Political Economy Seminar Series - "A Democratic Measure of National Income' Martin Weale

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Date: Wednesday 16 October 2019 Time: 18:00 -19:30 Speaker: Martin Weale Talk Title:‘A Democratic Measure of National Income’ Location: Ramsden Room, St Catharine’s College

Speaker Martin Weale is Professor at King’s College, London. He joined King’s College in 2016 after completing two three-year terms as a member of the Monetary Policy Committee of the Bank of England. He had previously been the Director of the National Institute of Economic and Social Research from 1995 to 2010. In 2011 Queen Mary, University of London appointed him a part-time Professor of Economics – a position he held until 2016. Until 1995 he was a lecturer in Economics at the University of Cambridge and a Fellow of Clare College (B.A. 1977, Sc.D. 2006). He was a member of the Statistics Commission from 2000 to 2008 and of the Board for Actuarial Standards from 2006 to 2011. Weale was appointed CBE for his services to Economics in 1999 and was elected an Honorary Fellow of the Institute of Actuaries in 2001. City University awarded him an honorary doctorate in 2007.

Talk Overview: National income per capita is widely used as the basis for comparing living standards in different countries. But conventional measures of national income growth are plutocratic. The growth in the incomes of people with initially high income had more influence on the aggregate than does the growth of the incomes of people with initially low income. This paper argues the case for constructing a democratic measure of national income growth, the growth rate of the geometric mean of income per household – one which gives equal weight to the growth experience of each household, whether its initial income is high or low. To do this means allocating the whole of national income to households, and a method of doing this is suggested. While the Living Conditions and Food Survey is the primary source, issues of under-reporting have to be addressed. This is done by means of stochastic imputation on the basis of covariates. In order to produce a democratic measure of real income growth, it is necessary to compute a democratic deflator – based on the average of each household’s expenditure shares rather than shares in total consumption. Deflation of the geometric mean of each household’s income by this deflator makes it possible to calculate a democratic measure of real income growth. As a result of declining household income inequality since the economic crisis this measure of real income has grown slightly faster than the plutocratic measure since 2006.

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