Contents xi Contributors xiv Foreword by Partha Dasgupta xix Preface by Anantha Duraiappah xxii Acknowledgements xxiv Abbreviations xxvii Executive summary 1 Introduction Part I: What does the data say? 15 Chapter 1 Accounting for the inclusive wealth of nations: key findings of the IWR 2014 Pablo Muñoz, Kira Petters, Shunsuke Managi, and Elorm Darkey 63 Chapter 2 The IWR and policy lessons Anantha Kumar Duraiappah, Cecília Fernandes, Pushpam Kumar, and Rodney Smith Part II: Human capital 83 Chapter 3 Human capital measurement: a bird’s eye view Gang Liu and Barbara M. Fraumeni 109 Chapter 4 Human capital: country estimates using alternative approaches Barbara M. Fraumeni and Gang Liu 23 Chapter 5 Health capital Kenneth J. Arrow, Partha Dasgupta, and Kevin J. Mumford Part III: New insights 137 Chapter 6 Forest wealth of nations Haripriya Gundimeda and Giles Atkinson 159 Chapter 7 Challenges to ecosystem service valuation for wealth accounting Edward B. Barbier 179 Chapter 8 Using inclusive wealth for policy evaluation: the case of infrastructure capital Ross D. Collins, Vivek Sakhrani, Noelle E. Selin, Adnan Alsaati, and Kenneth M. Strzepek 201 Annex 1: Conceptual framework 207 Annex 2: Methodology 219 Annex 3: Data 323 Glossary of terms 326 Contributing organizations

Figures Chapter 1 1. A three-capital model of wealth creation..............18 2. Schematic representation of the Inclusive Wealth Index ( ) and the Adjusted Inclusive Wealth Index ( adj)..........................................................20 3. Annual average growth rates in , per capita and adj for the 140 countries assessed in the IWR 2014 during the time period between 1990 and 2010............................................................ ............22 4. Annual average growth rate in and per capita ................................................................ ..........................23 5. growth rates before per capita adjustment disaggregated by capital form, annual average for 1990-2010. ................................................................ ...............24 6. Changes in worldwide inclusive wealth per capita and other indicators for 1992-2010...........................27 7. Percentage of human, produced, and natural capital in total wealth, annual average for 1990- 2010............................................................ ..................................29 8. Developments in the composition of wealth by capital form, 1992-2010. ..................................................30 9. Percentage shares of human capital and natural capital in total wealth, average 1990-2010...........30 10. Average annual growth rates of adj disaggregated by the three adjustments .................................34 11. Average annual growth rates of per capita, GDP per capita, and HDI, period 1990-2010 (in percentage) ................................................................ ............36 12. Comparing annual avarage growth in per capita, GDP per capita, and HDI, period 1990- 2010............................................................ ...................................37 Chapter 2 1. Average education levels attained across countries ................................................................ ............................. 66 2. Growth rates of investment in education per capita across countries, 2010/2009 ........................67 3. Change in cropland wealth per capita, 2010/1990 69 4. Changes in pastureland wealth per capita, 2010/1990 ................................................................ ................70 5. Change in cropland wealth per capita..................... 71 6. Energy projections by energy source ..................... 72 7. Energy demands until 2040.......................................... 73 8. Reserves-to-production: remaining extract years of fossil fuels ................................................................ ......... 74 9. Oil crude prices ................................................................ .... 74 10. Change in oil wealth per capita (in percentage), 2010/1990 ................................................................ ................ 75 11. Germany: natural capital per capita – annual growth rates........................................................... .................76 12. Germany: consumption of solar energy (terawatts-hours)............................................... .........................76 13. The fossil fuel, natural capital, renewable energy, inclusive wealth cycle .......................................................77 Chapter 3 1. Human capital: a sketch of its formation, composition, and benefits generated............................... 87 2. A taxonomy of different measuring approaches...................................................... .........................91 Chapter 4 1. International comparison of J-F human capital per capita, individuals aged 15 to 64, 2006.........116 2. Average years of education 2005 compared with human capital per capita 2006, individuals aged 15 to 64.............................................................. .........................117 3. Comparison of education attainment, 2005. Between ages 25-34 and 55-64, with ages 15-64 average comparison...................................................... .....117 4. 2005 Educational attainment comparisons, ages 25-34 vs. ages 55-64.......................................................118 5. Cross tabulations of younger vs. older educational attainment, 2005 and human capital per capita, 2006............................................................ ...............119 Chapter 5 1. Life expectancy at birth.................................................125 2. Use of capital in production........................................126 Chapter 6 1. Growth (measured in GDP) vis-à-vis forest area (in hectares) accumulation in different countries, 1990-2010....................................................... ........................147 2. Trade-offs between economic growth and forest quality (measured by growing stocks in cubic metrics)........................................................ ............................148 3. Trade-offs between growth (measured in GDP) and forest wealth.......................................................... .....149 4. Decadal average change in wealth to change in GDP............................................................. ...............................152 5. Composition of forest wealth in selected countries, 2010............................................................ ...................153 6. Relation between change in population and change in forest wealth (in percentage), 1990- 2010 ................................................................ ..........................154 Chapter 7 1. Adjusting GDP for reproducible, human, natural, and ecological capital ......................................................161 2. Valuing ecosystem goods and services and ecological capital depreciation..................................162 3. Replacement cost vs. expected damage function estimation of protective value...................................168 Chapter 8 1. Inclusive wealth of an economy represented as a dynamic, interconnected system.............................182 2. Infrastructure-adjusted human capital may be lower than the baseline projection due to health related reductions in the adult population and/or life’s working period. ........................................................186 3. Percent change in capital stocks per capita in China compared to the base year (1990 to 2008); reproduced using data from the UNU-IHDP and UNEP (2012) Data annex ................................................187 4. Mean monthly Nile flow at Aswan and growing seasons; the dam resulted in larger and more stable flows in the summer growing season. Reproduced with permission from Strzepek et al. (2008).......................................................... .............................189 5. 1000 oil price trajectories (1990 to 2008) modeled using GBM............................................................. ......192 6. The distribution of 2008 oil wealth in Saudi Arabia under oil price uncertainty............................193 7. Wealth-based scenario analysis should search for near-term policies that will perform reasonably well across the landscape of plausible futures and values.......................................................... ...195

Tables. Chapter 1 1. Relative contribution (in percentage) of human, produced, and natural capital to growth by sub-regions, regions, and total world average ................................................................ .....................26 2. Regional and subregional composition (in percentage) of wealth by capital form, average 1990-2010....................................................... ..........................31 3. Wealth composition (in percentage) based on income-based country classification, average 1990-2010....................................................... ..........................31 4. Decomposition analysis of the three terms accounted in for human capital and their contribution to the changes in human capital.................41 Chapter 3 1. Key findings about country practices on measuring human capital................................................95 2. A list of selected national studies applying income-based approaches........................................... 97 Chapter 4 1. Ranking of countries by J-F per capita lifetime income ................................................................ ......................116 2. Cross tabulations of younger vs. older educational attainment and human capital per capita ................................................................ .........................119 Chapter 5 1. Total health expenditure (percentage of GDP) 124 2. Estimated value of the average annual increase in life expectancy in the U.S........................................130 Chapter 6 1. Values of ecosystem services from the TEEB database considered for the study.........................145 2. Absolute forest wealth and per capita wealth in the countries selected for the study .....................150 3. Changes in forest wealth and per capita capital vis-à-vis GDP growth......................................................155 Chapter 7 1. Examples of estuarine and coastal ecosystem services and valuation studies...................................164 2. Valuation estimates for the storm protection benefits of coastal restoration, Louisiana...........165 3. Valuation of storm protection service of mangroves, Thailand, 1996-2004 ............................169 Chapter 8 1. Decomposition of welfare loss in 2005; these estimates represent the difference between what historically occurred and what would have occurred under a cleaner infrastructure scenario. Reproduced with permission from Matus et al. (2012).......................................................... ................................187

Boxes Chapter 1 1. Changes in worldwide aggregate inclusive wealth.......................................................... ................................27 Chapter 2 2. Health policy and the IWR..............................................65 3. Case: Germany’s energy transformation...............76 Chapter 4 1. Policy implications of human capital wealth analyses........................................................ ...........................120