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Can NNP be used for welfare comparisons?

Published online by Cambridge University Press:  29 January 2007

Department of Economics, University of Oslo, P.O. Box 1095 Blindern, NO-0317 Oslo, Norway. E-mail:


This paper contains a critical assessment of the claim that NNP can be used for welfare comparisons. The analysis assumes that national accounts are comprehensive (in particular ‘greened’ by taking into account environmental amenities and natural resource depletion), but does not assume optimal resource allocation. The general conclusion is that greater NNP corresponds to welfare enhancement only if net investment flows are revalued. Real utility-NNP and real measurable NNP made comparable across time by means of a consumer price index allow for such revaluation, and thus indicate welfare improvement.

Research Article
© 2007 Cambridge University Press

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I thank two anonymous referees for useful comments, Bengt Kriström, Karl-Gustav Löfgren and other participants at the 12th Ulvön Conference on Environmental Economics for helpful discussions, Cornell University for hospitality, and the Research Council of Norway for financial support.