MEASURES OF REGIONAL INCLUSIVE WELFARE : EVALUATING UTILITY WITH LEISURES AND INEQUALITY

Abstract

It is argued that GDP is not a sufficient indicator that captures regional level of welfare. This paper measures regional inclusive welfare by using the utility maximization theory of microeconomics. Following the framework suggested by Jones and Klenow (2016), this paper extends GDP by taking leisure and inequality into consideration. This extended GDP is applied to Japanese prefectures and cities. We show a large difference between traditional GDP and extended GDP in spite of its positive correlation. We also show that there differences mainly comes from leisure times, instead of inequality. To capture multidimensional welfare of regions, we should pay more attention to residents’ leisure time.