Research On The Theory And Indicator Construction Of Economic Welfare Accounting

China has been experiencing sustainable economic growth since the reform andopening up, while the economic welfare fell behind in recent years.According to theobject proposed by the12th Five Year Plan to guarantee and improve the livelihood ofpeople as the essential starting point and foothold of speeding up the transformation ofeconomic development mode, it means that improving the welfare of the people isplaying a more and more important role during the current stage.In this context, thispaper tries to build the indicator system of economic welfare which can objectivelyreflect the situation in China, proves the evaluation formula of welfare proposed by WuKangping (2012) mathematically, evaluates the situation of economic welfare in Chinaduring the past30years, studies the relationship between economic growth and welfareimprovement, and proposes suggestions on how to improve the resident’s welfare.Under the basic approach of “theoretical researchâ†'Empirical Analysisâ†'indicatorconstructionâ†'practical applicationâ†'policy recommendations ",this paper adopts themodeling methods of econometrics to analyze above issues.Specifically, from the point of basic concept of welfare, this paper discussesfoundational theories of economic welfare accounting problem, and tests the key factorsand influence forms that influence the economic welfare on micro-data, to providetheoretical and empirical foundations to construct measure of economic welfare forChina. Under the SNA system, following the basic paradigm of national economywelfare accounting proposed by Nordhaus&Tobbin (1972), drawing the concept ofsustainable development in the ISEW and Green GDP indicators of economic welfareindicators, learning the idea of building axiomatic welfare indicator from Sen (1976),this paper builds China’s economic welfare indicators. Therefore, our indicator systemof economic welfare focuses to eliminate influence of the inflation, to deduct thespendings of defensive and instrumental expenditure, and to take out the contents of theexhaustible resource depletion and environmental destruction in the net national income.More importantly, our welfare indicator reflects the complex relationship between thedegree of income inequality and the resident economic welfare.This paper calibrates the parameter a in CMEW with the real per capita consumption which can be used to measure the economic welfare, and shows that theoptimal Gini coefficient in China is roughly near0.35, in the process of evaluating theeconomic welfare during the past years in China. It is obvious that the growth rate ismuch too slow from the relationship of real GDP per capita and CMEW per capita.Therefore, the Chinese government should be vigilant against the "thresholdhypothesis" phenomenon proposed by Max-Neef (1995) in the future.Finally, according to the results of micro test and macro evaluation, this paperproposes the following approaches to improve the economic welfare of the people andmaintain sustainable economic growth: increasing the income share of the residents,promoting the consumption of the people, amending the income distribution, controllingthe over-exploitation of exhaustible resources and curbing the deterioration of theenvironment.